Israeli Tax Alerts | Practical Interpretations | 2008-2020

216 the increase in the value of the asset that they have exchanged (or "sold"), primarily in the year 2017. Ancillary results and additional insights From what was stated by the Judge, which reflects the judicial norm in the tax laws, only real enrichment should be taxes, and taking the digital currencies market into account, it would be appropriate to enable the deferral of the tax until the final meeting with "the money", and we would like to illustrate this point: Where a client has executed exchange transactions between crypto currencies, where their value increased very sharply during the course of 2017, it should be interpreted that so long as they have not "cashed out" the "enrichment" into "real money"- it should not be taxed. We are aware of many cases in which the value of the crypto portfolios following the collapse of the value of the currencies in 2018 their value has reached an amount that is even lower than the amount of the tax! We hope that when cases like these are clarified in the Court, the Judge will find the legal and the economic way to rule that these events should not be taxed - but rather this should be done at the time and in accordance with the "cash" value in "real currency". In any event and under the assumption that the Tax Authority is aware of the colossal volume of the exchanges that have been performed in the crypto currencies, and with the collapse in the value of the various currencies, in order not to tarnish this large "harmed" population (who without any great joy will submit reports on a gain from the exchanges, whereas in practice they have only realized losses) as criminal, it would be appropriate to make a change in the legislation, which would enable the continuity of the taxation, whilst exempting an exchange from currency to currency from taxation, with taxation only at the end of the day. There is a not inconsiderable public made up of people who hold these currencies and who have been waiting to make a voluntary disclosure process. These people too need such a solution. In addition, the Court's determination will enable the recognition of capital losses for all of those people who sold their coins after the fall in the price of the Bitcoin and other crypto currencies. And finally - since it has been determined that the Bitcoin is not a currency but rather an asset, it is possible that the Law for the Reduction in the Use of Cash (a law that was legislated recently in Israel with the objective of reducing the use of cash, which is not traceable and not