Is swapping one crypto for another a taxable event in Israel?

In brief

Status of a swap

A sale, under reportable position 91/2021

Without shekels

A taxable event even when no fiat money is received

Value of the swap

The fair value in shekels at the time of the swap

The coin received

Its value at the time of the swap is its original price

Stablecoins

A digital asset, not a currency or foreign currency

Moving between your own accounts

Not a sale

What is the rule that a swap is a sale based on?

Section 88 of the Income Tax Ordinance defines a "sale" broadly: including an exchange, and any other act or event by which an asset leaves a person’s possession. Swapping one digital coin for another is an exchange of one asset for another.

The Tax Authority said so explicitly in reportable position 91/2021: exchanging one coin for another counts as a realization even when no official currency is received, as when bitcoin is exchanged for ether.

The Tax Authority’s digital-assets Q&A also lists exchanging one digital asset for another among the acts that are a sale, alongside a sale for fiat money and paying for goods or services.

How is a swap valued in shekels?

The consideration in a swap is the fair value in shekels of the coin given up, at the time of the swap. The difference between that and the coin’s original price, taking changes in the Consumer Price Index into account, is the gain or loss.

Income Tax Circular 05/2018 provides that in an exchange the same amount also sets the original price of what was received. So the coin received in a swap is recorded at its value at the time of the swap, and its next sale is taxed on the change in its value since then.

A fee paid in a digital coin is a payment for a service made with a digital asset, so it too is a sale of the coin it was paid in. Transaction costs that are allowed as a deduction are subtracted from the consideration when the gain is calculated.

Is swapping into a stablecoin a sale too?

Yes. The Tax Authority’s Q&A lists stablecoins, tokens pegged to a stable asset such as the US dollar, among the types of digital asset, and states that its guidance applies to every type.

The Tax Authority has also ruled that a virtual currency is neither a currency nor a foreign currency as the Bank of Israel Law defines them. So swapping bitcoin for USDT is a sale of the bitcoin, even though USDT’s value is pegged to the dollar.

What does not count as a sale?

Buying a digital coin with fiat money is not a taxable event, and neither is holding it, whether its value rises or falls.

Moving coins between digital wallets or exchange accounts belonging to the same person is not a sale, because the asset has not left that person’s possession.

How does Crypto Tax handle swaps?

Crypto Tax records every swap as a sale of the coin given up and a purchase of the coin received, values both in shekels at the time of the swap, and calculates the gain or loss it produced.

Fees paid in a coin are included in the calculation, and every swap in the tax year is brought together in one ready-to-file capital gains report.

Sources

• Digital assets Q&A, Israel Tax Authority (opens in a new tab)
• Reportable positions for tax year 2025, position 91/2021, Israel Tax Authority (opens in a new tab)
• Income Tax Circular 05/2018 - taxation of decentralized payment means, Israel Tax Authority (opens in a new tab)
• Income Tax Ordinance [New Version], section 88, Israel Tax Authority (opens in a new tab)