The Israel Tax Authority has published a circular draft on taxation applicable to companies that raise money through ICOs (Initial Coin Offerings) and to those who hold ICO tokens. The circular is intended to apply only to the issuance of Utility Tokens, namely tokens issued by a central entity that represent an obligation of the issuing entity to provide the token holder a service or a product under development.
According to the circular draft, the consideration received from the issuance will be considered taxable income of the issuing company. The sale of tokens by their holders in the secondary market will be considered taxable capital income, or if the seller's activity is considered a business – as taxable business revenue. In addition, the issuance of tokens to employees will be considered taxable income for the employees according to the value of the token.
CLICK HERE to read the Draft Circular (in Hebrew)