Crypto Taxation in Israel

How does the Israel Tax Authority classify cryptocurrency?

The Israel Tax Authority (ITA) issued Circular 5/2018 on January 17, 2018, formally classifying virtual currencies as an "asset" under the Income Tax Ordinance (New Version), 1961 -- not as currency (ITA Circular 5/2018). This classification is the cornerstone of Israeli crypto taxation. Because cryptocurrency is treated as a capital asset, disposals generate capital gains or losses rather than foreign-currency-exchange gains. Every time a holder sells, exchanges, or otherwise disposes of a digital asset, a taxable event occurs. The ITA confirmed this position applies to token-for-token swaps: exchanging one cryptocurrency for another is treated as disposing of the first asset and acquiring the second at its market value in Israeli shekels on the transaction date.

In November 2024, the ITA and the Ministry of Finance published a memorandum of law proposing to enshrine Circular 5/2018's positions directly in the Income Tax Ordinance, adding a statutory definition of "digital asset" as a "digital representation of value or rights, which can be transferred and stored digitally using distributed ledger technology" and explicitly excluding digital assets from the definition of "foreign currency" (ITA/Ministry of Finance memorandum, November 2024).

What capital gains tax rate applies to crypto disposals?

For individual investors holding cryptocurrency as a capital asset, profits are subject to a flat 25% capital gains tax rate, the same rate that applies to securities acquired after January 1, 2003 (PwC Worldwide Tax Summaries -- Israel, reviewed January 2026). The taxable gain is the difference between the disposal proceeds, converted to Israeli shekels at the transaction date, and the cost basis in shekels at acquisition.

High-income individuals face an additional surtax. The 3% surtax ("mas yesef") applies to total annual taxable income -- including capital gains -- exceeding 721,560 ILS in 2025, producing an effective combined rate of 28% on capital gains above that threshold (PwC Worldwide Tax Summaries -- Israel). Separately, a 2% surtax applies specifically to income from capital sources exceeding the same 721,560 ILS threshold. These two surtax layers can interact depending on the composition of a filer's income; qualified practitioners analyse which applies on a case-by-case basis.

When is an individual treated as a business rather than an investor?

The tax treatment shifts from capital gains to ordinary income when the ITA characterises a person's crypto activity as a business operation. The ITA applies a multi-factor test based on frequency and volume of transactions, the existence of dedicated infrastructure, whether the activity generates the taxpayer's primary livelihood, and the degree of organisation (Freeman Law -- Israel Cryptocurrency Laws and Regulation, 2024). When business classification applies, income is taxed at Israel's progressive marginal rates for individuals -- reaching 47% at 560,280 ILS and 50% above 721,560 ILS -- plus the 3% surtax above the same threshold, for a top effective rate of 53%.

Mining and large-scale staking activity typically fall into the business-income category. The ITA has indicated that mining constitutes business activity requiring registration as a financial institution for VAT purposes, with the 17% Israeli VAT rate applying (ITA Circular 5/2018; confirmed by Crowe Israel analysis). Private investors who neither mine nor trade at commercial scale generally remain in the capital-gains category.

What does the Form 1399 advance-payment requirement mean?

Under Israeli tax procedure, a person who sells or otherwise disposes of a cryptocurrency asset must submit Form 1399 to the ITA within 30 days of the transaction date. Form 1399 records the purchase price, sale price, resulting profit or loss, and the advance tax due. An advance payment of the estimated tax liability accompanies the form (confirmed by multiple Israeli practitioner sources including Dave Wolf and Co. Law Offices, and the Law Offices of Nimrod Yaron).

This 30-day rule differs from the annual-return model used in many jurisdictions and places an ongoing compliance burden on active traders. Annual tax returns are due by April 30 following each calendar tax year. In addition, individuals whose total cryptocurrency holdings exceed 200,000 Israeli shekels carry an annual reporting obligation regardless of whether a disposal occurred during the year (Tax Natives -- Israel crypto tax).

How are losses, staking rewards, and airdrops handled?

Capital losses from cryptocurrency disposals can be offset against capital gains from other cryptocurrency disposals in the same tax year (Nimrod Yaron and Co. -- Taxation of Cryptocurrency). Unused capital losses may be carried forward to offset future capital gains. Losses from capital assets cannot generally be offset against ordinary business income.

Staking and validator rewards are treated as ordinary income at their fair-market-value in Israeli shekels at the time of receipt. The receipt-date value becomes the cost basis; a later disposal of those same coins triggers a separate capital-gains calculation from that basis. Airdrops are handled similarly: the ITA's general position is that receipt constitutes income at fair-market-value, though the precise characterisation can depend on the circumstances of the airdrop (Tax Natives -- Israel crypto tax; Global Legal Insights -- Israel blockchain and cryptocurrency laws 2025).

Key rates at a glance

Infographic: Israel crypto tax flow

See also the Israel country overview and the related Israel capital gains tax guide for the broader framework within which these crypto rules sit.

Tax rules change. The information above is sourced from ITA circulars, PwC Worldwide Tax Summaries, and practitioner-verified analyses as of June 2026. A qualified Israeli tax professional can evaluate how these rules apply to a specific situation.