The government of Israel published a draft circular outlining possible approaches to the taxation of funds received through initial placement of tokens (ICO).
In the draft circular from the tax authority of Israel offered to impose a value added tax (VAT) at ICO, differentiating it into two types: service transactions and sales transactions. The draft notes that the goods or services offered to foreign nationals will be subject to a «zero tax rate» in accordance with applicable law.
Although the draft sets out possible methods of taxation of companies, triggering the sale of tokens, it does not affect the cryptocurrency directly, according to the report, published on the Agency’s website. In the project described different classifications for organizations running campaigns with a focus on the types of products or services offered, and any profits which may be followed by the company.
In accordance with the project, sales of tokens, which will collect more than 15 million new Israeli shekels (INS) are subject to the rules of accounting in accordance with applicable law. The amount of income tax may fluctuate:
«In cases where the tax liability is determined on a cash basis at the end of the year, and the buyer or service recipient is a resident of Israel, it is possible that the tax rate on a transaction will change in accordance with the provisions of the Law on VAT».
Investors selling tokens that they have previously acquired through the ICO will also be taxed, explained in the document. The circular stressed that it can be amended, and that the tax authority is waiting for public comment to improve on the above suggestions.