The Israeli District Court in Lod delivered a landmark decision classifying Bitcoin as an asset subject to capital gains tax. The decision was handed down in a dispute between the Israeli tax authority and the founder of a Blockchain-technology transportation startup.

The founder gained over 8 Million Israeli Shekels (nearly $2,500,000) in profits, by selling Bitcoin he had previously purchased. The founder argued that his profits are due to the fluctuating value of Bitcoin, which should be regarded as currency (exempt from Israeli taxes on fluctuations in its value), rather than an asset (subject to Israeli capital gains tax on fluctuations in its value).

The district court disagreed, finding that although the true nature of Bitcoin has yet to be determined, any conclusion finding that Bitcoin is a form of currency would be unacceptable. According to the court’s decision, such a conclusion would be wholly inconsistent with the surrounding legal, economical and taxation environments. The court also indicated that Bitcoin, like any other virtual money, stands a long way from being treated as foreign currency subject to the same rules of taxation as traditional currencies. The founder now faces 3 Million Israeli Shekels (approximately $830,000) in taxes, as a result of this decision.

Click HERE to read the court decision (in Hebrew).

This article was published in the Internet, Cyber and Copyright Group’s May 2019 Newsletter.