Crypto Reporting to the Israel Tax Authority: Form 1399 and the Annual Return

Reporting crypto to the Israel Tax Authority is a two-stage process. Within 30 days of every sale or exchange of a virtual currency, you file Form 1399(Y) and pay an advance payment on the gain, pursuant to Section 91(d) of the Income Tax Ordinance. On the annual tax return, Form 1301, you indicate that you had income from the realization of virtual currency, and those Form 1399 filings serve as appendices. Sales at a loss must also be reported: a loss that was not reported in the year it occurred cannot be offset in subsequent years.

Every sale of a virtual currency requires a separate report within 30 days. The Israel Tax Authority treats virtual currency as an asset, not a currency, and therefore any gain from its sale is a capital gain (for the classification and the cases in which it is treated as business income, see Bitcoin Taxation in Israel). Section 91(d)(1) of the Ordinance provides that a person who sold an asset must file a report with the Assessing Officer within 30 days of the sale date, including a calculation of the capital gain or capital loss, and pay an advance payment equal to the tax amount.

Exchanging one coin for another constitutes a sale in every respect. This is also how the question is worded on Form 1301: "Income from the realization of virtual currency, including exchange for other currencies." Anyone who swapped Bitcoin for another coin without withdrawing a single shekel to a bank account has already triggered a tax event.

The Correct Form: 1399, Not 1322

The report is filed using the Notice of Sale of an Asset under Section 91, Form 1399(Y) for individuals and 1399(C) for companies. The Tax Authority's service page explicitly lists virtual currencies among the assets that require this notice, and instructs filers to submit a separate form for each asset and to report losses as well. Form 1322, Appendix C to the annual return, is intended for gains from traded securities, and crypto is not reported on it.

Why There Is No Semi-Annual Reporting

For traded securities from which tax was not withheld, Section 91(d)(2c) allows reporting twice a year, on January 31 and July 31. This relief does not apply to virtual currencies. The State Comptroller wrote in November 2024 that the 30-day requirement creates a heavy burden on those who carry out hundreds of transactions a year, and the Tax Authority responded that the rules governing the frequency of reporting on digital assets are included in legislative amendments it is advancing. Until the law changes, the deadline remains 30 days.

Who Is Required to File an Annual Return

Under Section 131(a) of the Ordinance, every individual who is an Israeli resident aged 18 or older is required to file an annual return, unless the exemption regulations exempt them. The regulations exempt an individual whose entire income is of the types listed therein, such as salary, rental income, interest, and securities. Gain from the sale of virtual currency is not explicitly listed, so a salaried employee who sold crypto at a profit should check whether the exemption still applies. The exemption also does not apply when the Assessing Officer has demanded that you file a return.

You start with the complete transaction history and finish with the annual return. Here are the steps:

1. Download the transaction history from every exchange and every wallet you used, going back to your first purchase. The original cost of each coin determines the gain, even if it was purchased years ago.

2. Calculate the gain or loss on each transaction separately. This is what the Tax Authority's "Know Your Rights and Obligations" guide for 2025 instructs.

3. Fill out Form 1399(Y) and mark transaction symbol 77 and code 71, which denote a sale or exchange of virtual currency. When filing online, also enter the wallet address — up to two addresses.

4. Submit to the Assessing Officer within 30 days of the sale date, and pay the advance on the gain at the same time. The Assessing Officer may increase the advance amount.

5. On the annual return, mark the question about the realization of virtual currency in Part A of Form 1301, and attach all Form 1399 filings for the entire year. When filing online, also enter the form data within the return itself.

Many Transactions in a Single Month

If you carry out dozens or hundreds of transactions in a month, you do not need a separate form for each one. According to the official guide, you may group all of the month's transactions and report them as a single transaction, enter a weighted-average acquisition date in the date field, and attach a working paper detailing the calculation of each transaction. An alternative the guide offers: instead of the acquisition date, enter the real capital gain at a rate of 25% on line 27, as a transaction with symbol 51 and code 71.

For example: you made 60 coin-to-coin exchanges in March. You calculate each exchange separately, file a single Form 1399 summarizing March, and attach a working paper with all 60 calculations.

When to File the Annual Return

The return is filed in the year following the tax year. According to the Tax Authority's guide, the return for 2025 was due by April 30, 2026, and those required to file online had until May 31, 2026, unless an extension was granted.

Which Documents to Keep

Income Tax Circular 05/2018 requires retaining the documents from which the income is derived. In an audit, the authorities typically request a letter explaining how the coins were purchased and sold, bank account statements showing the flow of funds, and screenshots of the transactions and the holding period. Some of these are also required when filing a request under Form 909, to which you attach proof of the source of funds and a working paper tracing the coin trail.

Most mistakes in crypto reporting stem from incomplete or late reporting. Here are the recurring ones:

• Reporting only withdrawals to shekels. Every exchange between coins is a sale, and anyone who skipped those transactions will also miscalculate the cost basis for the final sale.

• Waiting for the annual return. The State Comptroller noted that many taxpayers report only on the annual return and not within 30 days as required.

• Not reporting a loss. Section 92(b) allows carrying a loss forward to subsequent years only if a return was filed for the year of the loss. For the offset rules themselves, see Offsetting Crypto Losses Against Capital Gains.

• Reporting on Form 1322 for traded securities instead of on Form 1399.

• Assuming that a salaried employee is exempt from filing a return even after selling coins at a profit.

For tax rates, the surtax, and the calculation itself, see the page on Taxation of Crypto Gains.

Crypto activity reporting at the firm is handled by Adv. & CPA Shlomi Vaknin, who before founding the firm in 2024 spent 18 years as a senior partner at a tax practice.