Israeli Court Orders Bitcoiner to Pay Nearly $900,000 for Tax Evasion

The Israel Tax Authority has won a court case against Noam Copel, a Bitcoin investor and founder of a blockchain startup called DAV, who bought the cryptocurrency in 2011 and sold it in 2013 with a profit of NIS 8.27 million (over $1 million), without paying taxes.

Now, an Israeli court has ruled that the sale of bitcoin attracts a capital gains tax (CGT), as bitcoin is an asset, not a currency, reports local news source, Globes on May 21, 2019.

Bitcoin Is not a Currency

Israeli authorities have once again made it clear that bitcoin and other digital assets are not currencies.

In the latest scenario, Judge Shmuel Bornstein of a Central District Court in Lod, has reportedly ordered crypto investor Noam Copel to pay over $1 million to the tax agency and another NIS 30,000 ($8,304) as “costs” for failing to file his tax from the profit realised from the sale of bitcoin in 2011.

The appellant, who reportedly bought bitcoin (BTC) in 2011 and sold it in 2013 for a massive profit, argued that the flagship cryptoasset should be classified as a foreign currency, and his profits should be seen as “exchange rate differences received by an individual not in the course of a business” and as such it should not be taxed.

However, the Israel Tax Authority declared that bitcoin is not a currency and therefore could not be classified as a foreign currency.

The agency made it clear that bitcoin is just an asset and CGT must be paid on profits generated from the sale of the pioneer cryptocurrency.

The Court Agrees

As expected, the court took sides with the tax agency, stating categorically that the Bank of Israel Law stipulates that a currency must have “some physical – concrete manifestation.” Copel failed to prove that bitcoin met the apex bank’s definition of a currency, or that it functioned as an alternative to fiat in any jurisdiction.

Commenting on the ruling, Gidi Bar Zakay CPA, the former deputy head of the Israel Tax Authority and a crypto tax specialist, reiterated that while the judge used the provisions of the Israeli law to rule that bitcoin is not a currency:

“What will ultimately determine whether Bitcoin is a currency is the reality test. Once its use becomes more widespread, the legislature will have to rewrite the law to accommodate it (bitcoin) and we shall all benefit from these technological and monetary developments.”

As reported by BTCManager in February 2018, the Israeli Tax Authority made its intentions to tax bitcoin and altcoins known to the public in February 2018 and the agency has been hunting down tax evaders ever since.