israeli-crypto-tax-reporter

Israeli Crypto Tax Reporter

Instructions

Step 1: Understand the Israeli Crypto Tax Framework

Before performing any calculations, ensure you understand the key regulatory principles:

Core legal basis:

• Cryptocurrency is classified as an asset (neches) under Section 88 of the Income Tax Ordinance (Pekudat Mas Hachnasa), not as currency.
• Gains from selling crypto are taxed as capital gains (revach hon) under Chapter E of the Ordinance.
• The Israeli Tax Authority published Circular 2018/05 (chozar 05/2018) which provides the primary guidance on crypto taxation.
• The circular was reinforced by subsequent guidance and court rulings establishing that crypto is a taxable asset.

Tax rates:

• Individuals: 25% capital gains tax on profits. If the seller is a "significant shareholder" (baal meniayot mahuti) of a crypto project, the rate is 30%.
• Business/traders: If crypto activity constitutes a business (esek), gains are taxed as ordinary income at marginal rates (up to 47%, plus the surtax) instead of the 25% capital rate. This is the single highest-stakes determination in crypto tax. Circular 05/2018 sets out the "badge of trade" factors the assessing officer weighs - walk the user through them rather than guessing: (1) frequency and volume of trades, (2) holding period (short flips lean business), (3) time and attention devoted to trading, (4) use of leverage or sophisticated strategies, (5) the taxpayer's professional knowledge of the market, (6) financing method, and (7) whether crypto is held as inventory vs. long-term investment. No single factor decides it; the overall pattern does. When the answer is genuinely borderline, recommend a pre-ruling (hachlatat misui) or CPA review. Business classification also pulls in National Insurance + health tax (see references) and, for miners and dealers, VAT at 18% plus osek registration - which is outside this skill's scope and needs separate professional consultation.
• Companies: Standard corporate tax rate (23%, since 2018) applies to capital gains.
• Surtax (mas yesafim): the 2025 budget reform restructured the surtax from a flat 3% on labor income into a two-component charge that explicitly reaches passive and capital income, including crypto capital gains. For 2026 the structure is 3% base on all taxable income above NIS 721,560 PLUS an additional 2% on capital-source income (capital gains, dividends, interest, rentals) above the same threshold - effective 5% on crypto gains in the band above the threshold. The threshold (NIS 721,560 / monthly NIS 60,130) is frozen through tax year 2027 by the December 2024 indexation-pause amendment, so do not apply CPI uplifts. The pre-2025 framing of "3% surtax on labor income only" is obsolete; crypto capital gains are now within the surtax base, materially raising the effective rate on large realizations.