Tax on Crypto and Bitcoin

A private investor pays a 25% capital gains tax on the real (inflation-adjusted) gain from selling crypto, and high earners are also subject to the surtax. The tax applies to every sale, to conversion into another coin, and to payment with crypto, because under Income Tax Circular 05/2018 a virtual currency is classified as an asset. Those who trade at a volume that constitutes a business are taxed according to the marginal tax brackets. We calculate the tax for each year and file the returns, including for prior years. Send us your transaction files and we will check what needs to be reported.

• You sold coins at a profit and are unsure how to calculate the real gain in shekels.

• You swapped between coins dozens or hundreds of times and never reported the conversions.

• This year's profit may push your taxable income above the surtax threshold.

• You trade at high frequency and want to know whether the Tax Authority will treat it as a business.

• The bank refused to accept the funds, and you still need to pay the tax.

A taxable event occurs when you part with the coin. Merely holding is not taxable, even if the value has risen.

• Buying with fiat currency and holding in a wallet is not a taxable event.

• Transferring between two wallets you own is not a sale, but it is advisable to keep documentation showing that both wallets belong to you.

• Selling for shekels or dollars is a taxable event.

• Converting one virtual currency into another is a taxable event, even if the funds were never converted to shekels.

• Paying with virtual currency for a product or service is treated as a sale of the currency.

• Income from mining is business income under Circular 05/2018, and the miner must register as a dealer for VAT purposes.

The rate depends on whether you are an investor or whether your trading constitutes a business.

Private investor

An individual pays 25% of the real (inflation-adjusted) capital gain on the sale of crypto (Section 91 of the Income Tax Ordinance), meaning the gain remaining after deducting the CPI increase. Anyone whose taxable income in 2026 exceeds NIS 721,560 pays a 3% surtax on the portion above the threshold, plus an additional 2% on capital-source income exceeding it (Section 121B). The threshold has been frozen through 2027.

Example: An individual with no other income realizes a real capital gain of NIS 1,000,000 from selling Bitcoin in 2026. The capital gains tax is NIS 250,000. On the NIS 278,440 above the threshold, an additional 5% applies, i.e., NIS 13,922. The combined rate on that portion reaches 30%.

When trading constitutes a business

The Tax Authority and the courts examine the frequency of transactions, their volume, the trader's expertise, and the method of financing. When the activity rises to the level of a business, the profit is taxed as ordinary income according to the marginal tax brackets — up to 50% including the surtax — and National Insurance contributions also apply. For VAT purposes, under Circular 05/2018 such a business is classified as a "financial institution": it pays profit tax and payroll tax under Section 4 of the VAT Law, rather than VAT on each transaction.

• Within 30 days of a sale, the capital gain is reported on Form 1399.

• In the annual return (Form 1301), you indicate virtual-currency activity and report the year's gains and losses.

• Keep the documents that substantiate the gain: transaction files, purchase prices, and transfer confirmations. Circular 05/2018 requires maintaining records that demonstrate the reported income derives from the sale of the coins.

A loss from selling crypto is a capital loss. Under Section 92 of the Ordinance, it may be offset against capital gains in the same year — including gains from selling shares — and any unused balance carries forward to subsequent years. Under Income Tax Circular 10/2025, the carryforward is permitted only if a return was filed for the year in which the loss arose. The full rules are explained in our article Offsetting Crypto Losses Against Capital Gains.

An individual who has been refused by at least one Israeli bank may apply to pay the tax into the Tax Authority's account at the Bank of Israel. The application is submitted to the assessing officer on Form 909, accompanied by an affidavit and supporting documents showing the source of the funds used for the purchase and the coin's trail. Payment is made in shekels from an account at a foreign bank. According to a Tax Authority announcement from August 2026, the temporary-order procedure has been extended through December 31, 2027. Tax paid under this procedure is non-refundable, even if there were losses or credits not included in the assessment.

The procedure resolves only the tax payment. For depositing the remaining profit in a bank, see Proving the Source of Crypto Funds to Your Bank.

1. You provide transaction files from all exchanges, wallet addresses, and any annual returns already filed.

2. We reconstruct every taxable event, calculate the gain or loss in shekels, and determine whether the activity qualifies as investment or business.

3. We offset losses, calculate the surtax, and prepare the returns for the current year — and, if needed, amended returns for prior years.

4. We file and pay — through the bank or via the Form 909 procedure — and respond to any queries from the assessing officer.

Crypto tax cases are led by Adv. and CPA Shlomi Vaknin together with his firm's team. He spent close to a decade as a national inspector in the professional division of VAT at the Israel Tax Authority. As both a CPA and an attorney, he reviews the calculation as well as the legal classification of the activity — for example, whether frequent trading constitutes investment or a business.