Aggressive taxation is holding back crypto adoption in the Start-Up Nation

If Israel desires to become the ultimate tech-nation it has to offer a better taxation method for tech investors, including those in the crypto sector

Itay Mor 19:2617.03.21

The crypto world is back making headlines for all the right reasons, with Bitcoin recently crossing the $60,000 for the first time before slightly dipping in recent days. Bitcoin is the talk of the town once more. How much has it gone up? How much has it gone down? The world, people and governments now understand - Bitcoin is here to stay. But despite the international buzz around Bitcoin, our Start-Up Nation still looks at Bitcoin not as a currency but as a source of profit and as a taxable asset. It is a very different story in other countries.


Germany, for example, offers a unique take on taxing digital currencies. Unlike most other countries, it regards Bitcoin as private money, as opposed to a currency, commodity, or stock.


Adv. Itay Mor. Photo: Courtesy Adv. Itay Mor. Photo: Courtesy


In Belarus, President Alexander Lukashenko signed a decree to turn the country into a crypto-based digital economy. The decree excluded digital tokens from the same regulations as applied to traditional markets in the nation. The law exempts individuals who interact with cryptocurrencies from taxes until Jan 1, 2023.


Portugal, one of the most crypto-friendly tax countries in the world, declared in 2019 that it will not tax cryptocurrency and that cryptocurrency trading is not considered investment income. By doing so, Portugal became a crypto haven allowing private people to enjoy their crypto profits without sharing them with the authorities.


In Switzerland, the exchange of cryptocurrencies is considered the same as traditional payment transactions. According to the Swiss Federal Tax Administration, all profits and losses from crypto transactions made by individuals are exempt from tax reporting.


The Cayman Islands are another popular tax haven for individuals and companies. There are no taxes on all types of crypto activity in the Caymans. Due to their relaxed tax regulations, Cayman Islands is a favorite spot for many crypto firms.


Hong Kong has been a popular choice for many tech companies and investors for its simple regulatory and taxation framework. Furthermore, Hong Kong’s foreign income is not taxable, quite similar to Malta’s tax system. This has helped make the city a global financial hub, attracting many prominent investors in the crypto space.


Puerto Rico is another appealing relocation option for crypto traders and investors, particularly those who may wish to save taxes on their holdings. Puerto Rico comes under U.S. Territory, but it is considered a foreign country for U.S. federal income taxes. Puerto Rico is well known for Act 22 that maintains zero capital gains tax and only a 4% income tax rate.


But what about Israel? Since crypto is taxed as assets, they are subject to capital gains tax at a rate of 25%. In some cases, where the income from the purchase and sale of virtual currencies reaches sums qualifying to be a business, the taxation is different. If Israel desires to become the ultimate tech-nation it has to offer a better taxation method for tech investors, including those in the crypto sector. For now, Israel is losing billions in its aggressive taxation on this sector, and crypto investors are taking their fortune elsewhere.


Adv. Itay Mor is the chairman of Over the Rainbow - the Zionist movement in Portugal