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v10Israel
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| 1 | --- |
| 2 | name: il-crypto-tax |
| 3 | description: Use this skill when advising on Israeli cryptocurrency tax reporting and capital gains calculations. Trigger on phrases like "crypto tax Israel", "bitcoin tax Israel", "מס קריפטו", "FIFO Israel", "Form 1325 crypto", "Form 1322", "capital gains crypto Israel", "staking tax Israel", "airdrop tax Israel", "DeFi tax Israel", "voluntary disclosure crypto Israel", "gilui mirtzon", "גילוי מרצון", or any Israeli cryptocurrency tax query. ALWAYS read this skill before advising on Israeli crypto taxation. |
| 4 | version: 1.0 |
| 5 | jurisdiction: IL |
| 6 | tax_year: 2025-2026 |
| 7 | category: international |
| 8 | --- |
| 9 | |
| 10 | # Israel Cryptocurrency Tax Reporting Skill v1.0 |
| 11 | |
| 12 | > **Based on work by [Skills IL](https://github.com/skills-il/tax-and-finance)**, licensed under MIT. Adapted for the OpenAccountants format. |
| 13 | |
| 14 | --- |
| 15 | |
| 16 | ## Section 1 — Quick reference |
| 17 | |
| 18 | | Field | Value | |
| 19 | |---|---| |
| 20 | | Country | Israel (מדינת ישראל) | |
| 21 | | Scope | Cryptocurrency capital gains tax, DeFi income classification, reporting | |
| 22 | | Currency | NIS (Israeli New Shekel — ₪) | |
| 23 | | Classification | Cryptocurrency = Asset (Neches — נכס) under Section 88 ITO | |
| 24 | | Primary guidance | ITA Circular 2018/05 (חוזר 05/2018) | |
| 25 | | Cost basis method | FIFO (First In, First Out) — mandatory default | |
| 26 | | Tax rate — individuals | 25% capital gains (Revach Hon — רווח הון) | |
| 27 | | Tax rate — significant shareholder (10%+) | 30% | |
| 28 | | Tax rate — business/traders | Marginal rates (up to 50%) if activity constitutes a business | |
| 29 | | Corporate rate | 23% | |
| 30 | | Surtax on capital income above NIS 721,560 | 5% (3% base + 2% additional on capital income) | |
| 31 | | Advance payment form | Form 1399י (transaction codes 77 and 71) | |
| 32 | | Advance payment deadline | Within 30 days of disposal | |
| 33 | | Reporting forms | Forms 1322 / 1325 (attached to annual Form 1301) | |
| 34 | | Contributor | Open Accountants Community | |
| 35 | | Validated by | Pending — requires sign-off by Israel-licensed רואה חשבון or יועץ מס | |
| 36 | |
| 37 | ### Conservative defaults |
| 38 | |
| 39 | | Ambiguity | Default | |
| 40 | |---|---| |
| 41 | | Unknown whether activity is business or investment | Treat as investment (25% capital gains) — flag for professional review if high frequency | |
| 42 | | Staking reward classification unclear | Treat as income at receipt (most conservative) | |
| 43 | | Unknown NIS exchange rate for transaction date | Use most recent Bank of Israel business day rate | |
| 44 | | Crypto received as gift | Use donor's carryover basis (Section 97(a)(5)) | |
| 45 | | Stablecoins (USDT, USDC) | Still an "asset" — every conversion is a taxable disposal | |
| 46 | |
| 47 | --- |
| 48 | |
| 49 | ## Section 2 — Legal framework |
| 50 | |
| 51 | ### 2.1 Core principles |
| 52 | |
| 53 | - Cryptocurrency is classified as an **asset** (Neches) under Section 88 of the Income Tax Ordinance (Pekudat Mas Hachnasa — פקודת מס הכנסה), NOT as currency |
| 54 | - Gains are taxed as **capital gains** (Revach Hon) under Chapter E of the Ordinance |
| 55 | - ITA Circular 2018/05 provides primary guidance on crypto taxation |
| 56 | - Every disposal (sale, trade, conversion) is a taxable event valued in NIS |
| 57 | - **Crypto-to-crypto swaps are taxable events** — unlike some jurisdictions, Israel has always treated these as disposals |
| 58 | |
| 59 | ### 2.2 Business vs investment classification |
| 60 | |
| 61 | If crypto activity constitutes a business (Esek — עסק), gains are taxed as ordinary income at marginal rates (up to 50%). Classification depends on: |
| 62 | - Frequency and volume of trading |
| 63 | - Whether taxpayer holds crypto as inventory vs investment |
| 64 | - Time and effort devoted to crypto activity |
| 65 | - Whether the taxpayer has another profession |
| 66 | |
| 67 | When in doubt, treat as investment (25%) but flag for professional review. |
| 68 | |
| 69 | --- |
| 70 | |
| 71 | ## Section 3 — FIFO cost basis method |
| 72 | |
| 73 | Israel mandates FIFO (First In, First Out) for calculating cost basis unless the taxpayer can demonstrate a different method was consistently applied. |
| 74 | |
| 75 | ### 3.1 FIFO rules |
| 76 | |
| 77 | 1. Queue all purchases by date (oldest first) |
| 78 | 2. For each sale, match against the oldest available purchase lots |
| 79 | 3. Calculate gain/loss for each matched lot: (sale price − purchase price − fees) per unit |
| 80 | 4. If a lot is partially consumed, the remainder stays in the queue |
| 81 | 5. Sum all gains and losses for the tax year |
| 82 | |
| 83 | ### 3.2 Currency conversion |
| 84 | |
| 85 | - All transactions must be converted to NIS at the Bank of Israel exchange rate (Sha'ar Yatzig — שער יציג) on the transaction date |
| 86 | - For crypto-to-crypto trades, the NIS value of BOTH sides must be determined at the time of trade |
| 87 | - For weekends/holidays when BOI doesn't publish rates, use the most recent business day rate |
| 88 | |
| 89 | --- |
| 90 | |
| 91 | ## Section 4 — DeFi and special income classification |
| 92 | |
| 93 | | Activity | Classification | Tax rate | Reporting form | |
| 94 | |---|---|---|---| |
| 95 | | Buy and hold, then sell | Capital gain | 25% | Form 1325 | |
| 96 | | Crypto-to-crypto swap | Capital gain (disposal + acquisition) | 25% | Form 1325 | |
| 97 | | Staking rewards | Income at receipt (conservative); debated | 25–50% | Form 1301 or 1325 | |
| 98 | | Liquidity mining / yield farming | Ordinary income | Marginal rates | Form 1301 | |
| 99 | | Airdrops (free tokens) | Income at receipt, capital gain on subsequent sale | Marginal + 25% | Form 1301 + 1325 | |
| 100 | | Mining | Business income or capital gain (depends on scale) | Variable | Form 1301 or 1325 | |
| 101 | | NFT sales (creator) | Business income | Marginal rates | Form 1301 | |
| 102 | | NFT sales (collector) | Capital gain | 25% | Form 1325 | |
| 103 | | Hard fork tokens | Zero cost basis, capital gain on sale | 25% | Form 1325 | |
| 104 | | Lending interest (CeFi/DeFi) | Interest income | 25% (passive) | Form 1301 | |
| 105 | |
| 106 | ### Classification notes |
| 107 | |
| 108 | - **Staking:** ITA has not issued definitive guidance. Conservative approach treats rewards as income at receipt (market value), then capital gain/loss on subsequent sale |
| 109 | - **Airdrops:** Received tokens are income at market value on receipt date. Cost basis for future sale = market value at receipt |
| 110 | - **Hard forks:** New tokens have zero cost basis; entire sale proceeds are capital gain |
| 111 | - **Stablecoins:** USDT, USDC, DAI are still "asset" under Section 88. Every USDT-to-USDC swap, every conversion leg of a DeFi trade, every off-ramp to fiat is a taxable disposal |
| 112 | |
| 113 | --- |
| 114 | |
| 115 | ## Section 5 — Loss offsetting rules |
| 116 | |
| 117 | - Capital losses from crypto can offset capital gains from crypto in the same tax year |
| 118 | - Capital losses can offset gains from other assets (stocks, real estate) in the same year |
| 119 | - Capital losses carry forward to offset future capital gains under Section 92 (but cannot offset ordinary income) |
| 120 | - Losses from one spouse can offset gains of the other spouse if filing jointly |
| 121 | - **Israel has no wash-sale rule** — a taxpayer can sell in December at a loss and re-buy in January with the loss fully recognized |
| 122 | |
| 123 | --- |
| 124 | |
| 125 | ## Section 6 — Reporting requirements |
| 126 | |
| 127 | ### 6.1 Annual reporting (Forms 1322 / 1325) |
| 128 | |
| 129 | - **Form 1322** (Nispach Gimel — נספח ג) — primary capital gains schedule attached to annual return |
| 130 | - **Form 1325** (Nispach Gimel(1) — נספח ג(1)) — auxiliary detail form for securities/crypto where tax was not withheld at source |
| 131 | |
| 132 | For each disposal, report: |
| 133 | 1. Asset description (e.g., "Bitcoin (BTC)") |
| 134 | 2. Date of acquisition (FIFO-determined) |
| 135 | 3. Date of disposal |
| 136 | 4. Acquisition cost (NIS) |
| 137 | 5. Disposal proceeds (NIS) |
| 138 | 6. Capital gain or loss (NIS) |
| 139 | 7. Holding period |
| 140 | |
| 141 | ### 6.2 Advance payment (Form 1399י) |
| 142 | |
| 143 | - File within **30 days** of the capital gain event |
| 144 | - Transaction codes: **77** (sale) and **71** (virtual currency) |
| 145 | - Payment: 25% of gain for individuals (30% for significant shareholders) |
| 146 | - Advance payments are credited against annual tax liability |
| 147 | - Penalties for non-payment: interest (Ribit — ריבית) and CPI linkage (Hafreshei Hatzmada — הפרשי הצמדה) |
| 148 | |
| 149 | ### 6.3 Annual return obligation |
| 150 | |
| 151 | Salaried individuals with crypto disposals must file Form 1301 even if they would otherwise be exempt. Any disposal generally triggers a filing obligation. |
| 152 | |
| 153 | **Filing deadlines (tax year 2025, filed in 2026):** |
| 154 | - Online: June 30, 2026 |
| 155 | - Paper: May 31, 2026 |
| 156 | - CPA-represented: extensions available |
| 157 | |
| 158 | --- |
| 159 | |
| 160 | ## Section 7 — Surtax on crypto gains (Mas Yesafim — מס יסף) |
| 161 | |
| 162 | From 2026, capital income (including crypto gains) above NIS 721,560 is subject to: |
| 163 | - 3% base surtax on all income above the threshold |
| 164 | - Additional 2% on capital-source income above the same threshold |
| 165 | - **Effective 5% surtax on crypto gains above NIS 721,560** |
| 166 | - Threshold frozen through 2027 |
| 167 | |
| 168 | --- |
| 169 | |
| 170 | ## Section 8 — Voluntary disclosure (Nohal Gilui Mirtzon — נוהל גילוי מרצון) |
| 171 | |
| 172 | The 2025–2026 Voluntary Disclosure Procedure expressly covers digital assets and grants criminal immunity. |
| 173 | |
| 174 | | Track | Eligibility | Deadline | |
| 175 | |---|---|---| |
| 176 | | Green Track | Annual income up to NIS 500,000 and cumulative crypto assets up to NIS 1.5M (as of 31.12.2024) | 31 August 2026 | |
| 177 | | Regular Track | Larger cases | 31 August 2026 | |
| 178 | |
| 179 | Anonymity is no longer available — all applications filed with identifying details. |
| 180 | |
| 181 | --- |
| 182 | |
| 183 | ## Section 9 — Special rules |
| 184 | |
| 185 | ### 9.1 Gifts and inheritance |
| 186 | |
| 187 | Under Section 97(a)(5), gifts and inheritance use **carryover basis** — the recipient inherits the donor's original cost basis and acquisition date. Treating inherited crypto as zero-basis or fair-market-value at inheritance is incorrect. |
| 188 | |
| 189 | ### 9.2 Lost crypto |
| 190 | |
| 191 | Crypto lost to exchange insolvency (FTX, Celsius pattern), theft, or lost private keys is recognized as a capital loss ONLY when the loss is final and documented (e.g., bankruptcy court order, police report). Do not write off frozen-but-not-bankrupt balances. |
| 192 | |
| 193 | ### 9.3 Inflation indexation |
| 194 | |
| 195 | Section 91(b)(3) splits capital gain into a "real gain" (taxed at 25%) and an "inflation-component gain" (taxed at 0% for individuals on assets acquired after 1.1.1994). For long-held lots, a CPA should perform the manual indexation pass, which reduces effective tax. |
| 196 | |
| 197 | --- |
| 198 | |
| 199 | ## Section 10 — Worked examples |
| 200 | |
| 201 | ### Example 1 — Simple buy and sell |
| 202 | |
| 203 | **Scenario:** Bought 0.5 BTC in January 2025 for NIS 80,000, sold in August 2025 for NIS 120,000. |
| 204 | |
| 205 | **Working:** |
| 206 | - Capital gain: NIS 120,000 − NIS 80,000 = NIS 40,000 |
| 207 | - Tax: NIS 40,000 × 25% = NIS 10,000 |
| 208 | - Surtax: total income below NIS 721,560 → no surtax |
| 209 | - Advance payment: Form 1399י within 30 days of August sale → NIS 10,000 |
| 210 | - Annual reporting: Forms 1325/1322 with 2025 Form 1301 |
| 211 | |
| 212 | ### Example 2 — Crypto-to-crypto with FIFO |
| 213 | |
| 214 | **Scenario:** Bought 2 ETH at NIS 5,000 each (March 2024), 3 ETH at NIS 7,000 each (June 2024). In October, traded 3 ETH for 0.5 BTC when ETH = NIS 9,000. |
| 215 | |
| 216 | **Working:** |
| 217 | - FIFO: consume Lot 1 (2 ETH @ NIS 5,000) then 1 ETH from Lot 2 (@ NIS 7,000) |
| 218 | - Lot 1 gain: 2 × (NIS 9,000 − NIS 5,000) = NIS 8,000 |
| 219 | - Lot 2 partial gain: 1 × (NIS 9,000 − NIS 7,000) = NIS 2,000 |
| 220 | - Total gain: NIS 10,000 → Tax: NIS 2,500 |
| 221 | - New BTC cost basis: NIS 27,000 (3 × NIS 9,000) |
| 222 | - Remaining: 2 ETH at NIS 7,000 each |
| 223 | |
| 224 | ### Example 3 — DeFi staking rewards |
| 225 | |
| 226 | **Scenario:** Staked 10 ETH, earned 0.5 ETH in rewards (ETH = NIS 8,000 at receipt). Not sold. |
| 227 | |
| 228 | **Working:** |
| 229 | - Conservative: NIS 4,000 taxable income at receipt (0.5 × NIS 8,000) |
| 230 | - Rate: 25% if passive income → NIS 1,000 tax; or marginal rates if ordinary income |
| 231 | - Cost basis for 0.5 reward ETH established at NIS 8,000/ETH |
| 232 | - The 10 staked ETH have not been disposed — no capital gain event on those |
| 233 | - Recommend professional consultation on staking classification |
| 234 | |
| 235 | --- |
| 236 | |
| 237 | ## Section 11 — Common errors |
| 238 | |
| 239 | | Error | Consequence | |
| 240 | |---|---| |
| 241 | | Using US capital gains rates (15%/20%) | Israeli rate is 25% for individuals | |
| 242 | | Treating crypto-to-crypto as non-taxable | Always taxable in Israel | |
| 243 | | Using average cost or LIFO | Israel mandates FIFO | |
| 244 | | Ignoring stablecoin conversions | USDT/USDC are assets — every swap is a disposal | |
| 245 | | Treating inherited crypto as zero basis | Carryover basis applies (Section 97(a)(5)) | |
| 246 | | Applying US wash-sale rule | Israel has no wash-sale rule — loss harvesting is valid | |
| 247 | | Missing 30-day advance payment deadline | Interest and linkage penalties accrue | |
| 248 | | Ignoring surtax on crypto gains | 5% additional on capital gains above NIS 721,560 | |
| 249 | |
| 250 | --- |
| 251 | |
| 252 | ## Section 12 — Reference material |
| 253 | |
| 254 | | Resource | Reference | |
| 255 | |---|---| |
| 256 | | ITA Circular 05/2018 (crypto classification) | https://www.gov.il/he/Departments/legalInfo/04-2018 | |
| 257 | | Tax Authority — annual return service | https://www.gov.il/he/service/reporting-and-payment-2025-annual-tax-report-for-individuals | |
| 258 | | Bank of Israel — exchange rates | https://www.boi.org.il/roles/markets/exchangerates/ | |
| 259 | | Voluntary Disclosure Procedure 2025–2026 | https://www.gov.il/he/Departments/policies/voluntary-disclosure-2025 | |
| 260 | | Bituach Leumi — self-employed rates | https://www.btl.gov.il/Insurance/National%20Insurance/type_list/Self_Employed/Pages/rates.aspx | |
| 261 | | OECD CARF (Israel collection from 1 Jan 2026) | https://www.oecd.org/tax/exchange-of-tax-information/crypto-asset-reporting-framework.htm | |
| 262 | |
| 263 | --- |
| 264 | |
| 265 | ## Section 13 — When to escalate to a professional |
| 266 | |
| 267 | - Transaction volume exceeds 100 trades per year |
| 268 | - DeFi activities involve complex protocols (multi-chain, bridging, wrapping) |
| 269 | - Uncertainty whether activity constitutes business vs investment |
| 270 | - Total gains exceed NIS 500,000 |
| 271 | - Tokens received from ICO, IEO, or similar offering |
| 272 | - Cross-border transactions with foreign tax obligations |
| 273 | - Voluntary disclosure consideration |
| 274 | |
| 275 | --- |
| 276 | |
| 277 | ## Disclaimer |
| 278 | |
| 279 | > **חשוב:** כל המידע בקובץ זה מיועד למטרות מידע וחישוב בלבד. יש לבדוק כל עמדה מול רואה חשבון (Ro'eh Cheshbon) או יועץ מס (Yo'etz Mas) מוסמך לפני הגשה או פעולה. |
| 280 | |
| 281 | This skill and its outputs are provided for informational and computational purposes only and do not constitute tax, legal, or financial advice. Open Accountants and its contributors accept no liability for any errors, omissions, or outcomes arising from the use of this skill. All outputs must be reviewed and signed off by a qualified professional — such as a רואה חשבון (Ro'eh Cheshbon — CPA) or יועץ מס (Yo'etz Mas — tax advisor) licensed in Israel — before filing or acting upon. |
| 282 | |
| 283 | The most up-to-date, verified version of this skill is maintained at [openaccountants.com](https://openaccountants.com). Log in to access the latest version, request a professional review from a licensed accountant, and track updates as tax law changes. |
| 284 |
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About
Use this skill when advising on Israeli cryptocurrency tax reporting and capital gains calculations. Trigger on phrases like "crypto tax Israel", "bitcoin tax Israel", "מס קריפטו", "FIFO Israel", "Form 1325 crypto", "Form 1322", "capital gains crypto Israel", "staking tax Israel", "airdrop tax Israel", "DeFi tax Israel", "voluntary disclosure crypto Israel", "gilui mirtzon", "גילוי מרצון", or any Israeli cryptocurrency tax query. ALWAYS read this skill before advising on Israeli crypto taxation.
ILty-2025
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