Do you pay tax in Israel on crypto traded on a foreign exchange?

In brief

Basis of the liability

The filer’s residence, not where the exchange is

Source in law

Section 2 of the Income Tax Ordinance

Calculation rules

The same rules as on an Israeli exchange

Loss on an asset outside Israel

Offset first against capital gains outside Israel

Bringing money in to pay the tax

A form 909 request when an Israeli bank refuses it

Why does the tax apply to trading abroad?

Section 2 of the Income Tax Ordinance imposes tax on an Israeli resident’s income that was produced or accrued in Israel or outside Israel. This is the personal system of taxation: the liability follows the person’s residence, not the place the transaction was made.

The Tax Authority’s Q&A applies this expressly to digital assets: an Israeli resident who traded digital assets outside Israel is taxed in Israel on the income from that trading.

Is the calculation different when the exchange is foreign?

No. The same rules apply: a sale, a swap for another digital coin and paying with a coin are taxable events, and each trade is valued at its fair value in shekels at the time it was made, even when the exchange trades in dollars or a stablecoin.

Moving coins between an account on a foreign exchange and another account or wallet belonging to the same person is not a sale, because the asset has not left that person’s possession.

In its 2024 report the State Comptroller noted, citing a 2021 Israel Securities Authority survey, that about 70% of Israelis who invest in crypto do so on foreign exchanges.

What is still open about an asset held abroad?

Under section 92(a)(3) of the Ordinance, a capital loss on selling an asset outside Israel is offset first against capital gains outside Israel. The State Comptroller noted that where a digital asset is located is unclear, so it is not settled when this rule applies to one. On Form 1399, Crypto Tax reports the coins as an asset located in Israel, whichever exchange held them, following the tax advisor it consulted and section 89(b)(3)(a) of the Ordinance.

The same report noted that the Tax Authority had not published whether a digital coin is a "foreign asset" for the annual-return obligation that applies to people holding high-value foreign assets. Where the amounts are significant, it is worth consulting a tax advisor or accountant on these points.

What if an Israeli bank refuses the money?

The Tax Authority has published a procedure that lets an individual pay the tax on a gain from realizing virtual currencies directly into the Tax Authority’s account at the Bank of Israel, out of money that came from the coins, where an Israeli commercial bank refused to accept it. The request is made on form 909.

The request is accompanied by, among other things, a worksheet setting out the tax calculation, evidence of the source of the money used to buy the coins, a record of the coins’ path over the holding period, and the Israeli bank’s confirmation of its refusal. Companies cannot use the procedure.

How does Crypto Tax handle foreign exchanges?

Crypto Tax imports trading history from foreign exchanges, among them Binance, Kraken, Bybit, Coinbase and Bitget, from the exchange’s export file, or on some of them a connected read-only API key, and converts every trade to shekels.

Transfers between the same person’s accounts on imported exchanges are recognized as transfers rather than sales, and every exchange is brought together in one capital gains report for the tax year.

Sources

• Digital assets Q&A, Israel Tax Authority (opens in a new tab)
• Income Tax Ordinance [New Version], sections 2 and 92, Israel Tax Authority (opens in a new tab)
• State Comptroller, report 75A (2024) - taxation of digital currencies (opens in a new tab)
• Request to pay the tax due on realizing virtual currencies, form 909, Israel Tax Authority (opens in a new tab)