Bitcoin Will Be Taxed as an Asset: Israel Tax Authority
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Israel’s official tax authority has confirmed that cryptocurrencies like bitcoin will be taxed as an asset with investors subject to capital gains tax.
In an released on Monday, the Israel Tax Authority doubled down on its previous position of deeming cryptocurrencies as ‘assets’ rather than currencies. The authority an early official draft to clarify tax guidelines for cryptocurrency adopters in January 2017 following repeated requests from the community to clarify the government’s stance on the taxation of cryptocurrencies.
With its updated circular and a final draft in place, the authority will now press ahead with taxation guidelines for assets wherein individual investors will be subject to the 25% capital gains tax for profits from their cryptocurrency holdings. In addition, businesses and exchanges trading cryptocurrencies will be liable to pay a 17% value-added tax (VAT). Notably, individual investors will be exempt from paying VAT as cryptocurrencies used for investment purposes are markedly seen as intangible assets. Individuals who are involved in mining or trading cryptocurrencies will be subjected to the VAT of 17%.
The Authority’s official stance on classifying cryptocurrencies as “assets” coincides with taken by the country’s central bank. In a public speech in January, Bank of Israel (BOI) deputy governor Nadine Baudot-Trajtenberg stated the BOI’s position on cryptocurrencies “is that they should be viewed as a financial asset, with all that entails.”
The Tax Authority’s final draft on cryptocurrency taxation follows recent moves in January wherein tax officials published draft legislation to (ICOs), part of its wider focused move to collect from the cryptocurrency sector.
“The Tax Authority is monitoring the technological developments and its working to provide an answer regarding the tax implications of virtual currency transactions and the issuance of digital tokens,” said the authority’s director Moshe Asher at the time. The draft suggested that an individual’s income could be classified as a business income when “the sale of tokens reaches the level of a business”, leading to taxation under applicable rates.
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While () activation is looking by the hour, is getting ready to deploy a version of the Lightning network with or without the protocol upgrade.
The blockchain technology company, perhaps best known for its bitcoin mining pool of the same name, successfully sent real bitcoins over a test version of the Lightning Network this week. Interestingly, Bitfury’s implementation of the technology is compatible with the current bitcoin protocol and is therefore functional even without SegWit.
“This is a major accomplishment by our technical team and an important step forward for the Lightning Network and the growth of bitcoin,” Valery Vavilov, CEO of The Bitfury Group, said in a statement.
Lightning Network
is a highly anticipated second-layer scaling solution that allows for cheap and instant (micro)payments. Cleverly leveraging bitcoin’s basic scripting capabilities, Lightning users should be able to make a virtually unlimited number of transactions, where only a minimal proportion of them are recorded on bitcoin’s blockchain, thereby boosting bitcoin’s scalability. Meanwhile, all users remain in control of their own bitcoins at all times, maintaining the trustless properties of bitcoin itself.
“The Lightning Network has the potential to solve bitcoin’s scalability issue and provide instant payment functionality. By demonstrating that the Lightning Network can function now, Bitfury has cleared the way to increased transaction processing and further adoption of bitcoin,” Vavilov said.
Bitfury’s Lightning is based on, which is being developed by.
For its demo, the Bitfury software team created two Lightning transactions. One of these is a straight transaction from one Lightning node to the next, effectively simulating a payment channel between two users. Since it was only a test, Bitfury only made one transaction — but it could have made thousands back and forth at no extra cost.
The other test was a single-hop transaction, which better simulates the main purpose of the Lightning Network. Users pay each other through a mutual third party, without requiring any trust in this third party. While the Bitfury software team only made one transaction on this channel as well, it could, once again, have made thousands back and forth between all three parties, at no extra cost.
Since Bitfury’s test took place on the main net, and are recorded on bitcoin’s blockchain and can be seen by any typical block explorer.
Tests and SegWit
Bitfury’s is not the first successful test of the Lightning Network. Several companies, including Lightning Labs, Blockstream, ACINQ as well as Bitfury itself have experimented with their implementations of the technology. But since most of these companies are working on versions of Lightning that rely on Segregated Witness, these tests were limited to bitcoin’s testnet and Litecoin. Likewise, major wallet service Blockchain has sent “” transactions over bitcoin’s main net. But while Thunder resembles the Lightning protocol, it isn’t quite as trustless or decentralized.
As such, Bitfury is the first company to get a version of the Lightning Network up and running on the current bitcoin protocol.
“We released this first experimental version of the Lightning Network for bitcoin because we think the Lightning Network is an essential technology for bitcoin and would love to see it made available as soon as possible,” Vavilov said. “We are proud that our developers found a way to adopt the Lightning Network for bitcoin without SegWit. It’s a huge step forward for bitcoin scalability.”
Regardless, the CEO noted that he is hopeful that SegWit will activate on the bitcoin network. With currently getting close to its activation threshold, it seems increasingly likely that SegWit could be live within a month. This would allow for a version of the Lightning Network that offers an improved user experience.
Vavilov:
“The Lightning Network will be the most effective when used with SegWit, which is why we are fully committed to SegWit’s implementation, and we will continue working on a version of the Lightning Network that is compatible with SegWit.”
Bitfury, which started out as a bitcoin miner, has grown to become one of the largest private infrastructure providers in the Blockchain ecosystem. Part of this effort, the company has been supporting the development and implementation of the Lightning Network for well over a year. Bitfury previously also co-designed and successfully, a payment-routing solution for the Lightning Network.
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