foreign exchange-When and how should I pay taxes on ForEx

current community

  • chat
    blog

    Personal Finance & Money

your communities

Sign up or log in to customize your list.

more stack exchange communities

Stack Exchange

sign up
log in

tour

help

  • Tour

    Start here for a quick overview of the site

  • Help Center

    Detailed answers to any questions you might have

  • Meta

    Discuss the workings and policies of this site

Personal Finance & Money

  • Questions
  • Tags
  • Users
  • Badges
  • Unanswered
  • Ask Question

Take the 2-minute tour
×

Personal Finance & Money Stack Exchange is a question and answer site for people who want to be financially literate. It's 100% free, no registration required.

When and how should I pay taxes on ForEx trades?

up vote
10
down vote

favorite

I am an Israeli citizen. I’ve bought BitCoin (let us agree for sake of discussion it is a currency) using US dollars.

Let’s also assume I never convert the bitcoins to any other currency (but instead use them to purchase goods and services directly). Also let’s assume the monetary value of bitcoin rose when compared to … well, everything else (USD, ILS, Alpaca Socks).

Do I have any obligation to pay taxes for my « earnings » ? I mean, if I never convert bitcoin to USD, than at what point in time do taxes come into play?

Does the fact I’m asking about bitcoin and not … Euro or any other foreign currency matter at all?

taxes foreign-exchange bitcoin israel

share|improve this question

edited May 16 ’11 at 23:53

littleadv
74.5k494183

asked May 3 ’11 at 15:54

ripper234
1,1101826

  

 

This a comment because I am not sure, but haven't you already paid your taxes when you earned the money?
– 
MrChrister
May 3 ’11 at 22:43

2

 

@MrCrhister – I don't know, I made a payment via paypal to some dude, and got back bitcoin. I don't know if taxes were deducted by any of these parties (I don't think so)
– 
ripper234
May 3 ’11 at 23:11

add a comment | 

3 Answers
3

active
oldest
votes

up vote
9
down vote

accepted

Legally speaking, when you convert that bit-coin onto something else, the Israeli Tax Authority will look into the value of that something else, compare it to the original value of the previous something else you used to buy bit-coins (USD, in your example), and charge you capital gain taxes for the difference.

According to the Israeli law you’re supposed to pay taxes when selling (converting the bit-coin to something else), and since you’re not using any formal bank or stock broker which will automatically deduct the taxes, you have to pay the taxes yourself. By not doing so you’re committing a tax fraud.

The real question you’re asking is whether they’ll come after you. Well, that depends on the amounts. They might. Pay attention: there’s no statute of limitation for tax fraud in Israel. They may come after you in 50 years from now.

Another thing to keep in mind: if you used bit-coins to buy something (services or products of any kind), you probably didn’t pay the VAT (?? »?) – which is another case of tax fraud on your behalf.

PS: I’m not a lawyer or accountant, so get a professional advice, but I have been dealing with the Tax Authority in Israel, so I’ve got a pretty good idea of what the rules are.

share|improve this answer

edited May 16 ’11 at 23:57

answered May 16 ’11 at 23:49

littleadv
74.5k494183

  

 

Do you actually mean that whenever we sell anything we need to pay a percentage of what we earn? This seems ridiculous, I mean, for (real) example, I bought some sweets at 1 dollar and sell it to my friend for 1.1 dollars. I don't plan to pay tax for the 0.1 dollars I've earned. Am I committing a tax fraud?
– 
Pacerier
Apr 20 ’13 at 4:11

  

 

@Pacerier technically yes. Whether or not someone will come after you for $0.10 untaxed income, is an entirely different question.
– 
littleadv
Apr 20 ’13 at 5:49

add a comment | 

up vote
3
down vote

I don’t know how taxes work in Israel, but I imagine it is relatively similar to taxes in the US. In the US you need to pay taxes on investment earnings when you sell them or in this case trade them for something of value. The amount that would typically would be taxed on would be the difference between how much you paid for the currency and the value of the item you traded it for.

In theory there shouldn’t be any difference in trading bitcoins versus dollars or euros. Reality is that they are rather weird and I don’t know what category they would fall into. Are they a currency or a collectors item?

I think this is all rather hypothetical because there is no way for any government to track digital currencies and any taxes paid would be based on the honor system.

I am not an account and the preceding was not tax advice…

share|improve this answer

answered May 9 ’11 at 5:17

stoj
3,321615

  

 

Government can « track » digital currencies the way they « track » cash payments in local or foreign currency, gold or whatever: If you have a shiny new car, a large cash deposit to buy a new house or anything else that draws attention to you and no income/tax returns to match, you might need to account for the discrepancy. I don't know about the US but in many countries it certainly isn't an entirely hypothetical scenario, bitcoin or not.
– 
Relaxed
Jan 23 ’14 at 9:07

  

 

On the other hand, if the profits are small and you don't do anything with them, you probably don't risk much but that's already the case with cash or even with a regular bank account.
– 
Relaxed
Jan 23 ’14 at 9:09

add a comment | 

up vote
0
down vote

I guess Bitcoin are not that popular yet and hence there are no specific regulations. If currently it gets debated, it would be treated more like a Pre-Paid card or your Paypal account.
As you have already paid taxes on the $$ you used to buy the Bitcoins there is no tax obligation as long as you keep using it to buy something else.
The other way to look at it is as a commodity. If you have purchased a commodity and it has appreciated in value in future you may be liable to pay tax on the appreciated value. Think of it as a if you bought a house with the $$ and sold it later.

Once more serious trade starts happening, the governments around the world would bring in regulations. Till then there is nothing to worry about.

share|improve this answer

answered May 12 ’11 at 6:39

Dheer
15.4k32163

add a comment | 

Not the answer you're looking for? Browse other questions tagged taxes foreign-exchange bitcoin israel or ask your own question.

asked

3 years ago

viewed

650 times

active

3 years ago

Linked

7

Taxation from variations in currency

1

Tax consequences when foreign currency changes in value

Related

7

Taxation from variations in currency

5

Tax Loss on Forex Trading

1

Forex, trading “currencies” or trading “relations”?

0

Micro-Investing vs. cryptocurrencies vs. Forex trading

2

ROI on Forex Trading

1

Forex trading in US

0

How trading in currency pair works, underlying techniques and mechanisms

5

Tax implications of currency exchange between friends?

0

USA: Foreign currency savings, trades and tax implications

1

Tax consequences when foreign currency changes in value

Hot Network Questions

  • Does the increased Blood Shard cap apply account wide?

  • Is hitchhiking in western Europe safe if you're travelling with another person?

  • Just how unrealistic is a hovering city?

  • Is there an alternative to the scientific method?

  • What does the following typedef mean in chrono::duration?

  • How to convey: "don't move until the task is done!"

  • Tiling a Hexagon with Diamonds

  • difference between "would" and "will" when talking about the future

  • What are the differences between a standard Merlin engine and the Merlin Vacuum engine?

  • Latex distributions. What are their main differences?

  • What exactly makes the Haskell type system so revered (vs say, Java)?

  • Moving back and forth between two terrible fates

  • What does it mean when components in schematics do not connect

  • Showing how to solve an equation in LaTeX

  • Can spells be cast through a Wall of Force

  • Is "I like dogs but cats" a valid sentence?

  • How can I avoid the risk of mistakenly deleting data from a production environment with no backups?

  • Bringing babies to bar?

  • What figure of speech is this, "assaulted by a haircut"?

  • Avoiding static shocks from vehicles

  • How do I stop cars from tailgating?

  • Why do some bank websites use passwords that are not case sensitive?

  • What does the ?. mean in C#?

  • Several lines instructions

more hot questions

question feed

tour
help
blog
chat
data
legal
privacy policy
work here
advertising info

mobile
contact us
feedback

Technology

Life / Arts

Culture / Recreation

Science

Other

  • Stack Overflow
  • Server Fault
  • Super User
  • Web Applications
  • Ask Ubuntu
  • Webmasters
  • Game Development
  • TeX – LaTeX
  • Programmers
  • Unix & Linux
  • Ask Different (Apple)
  • WordPress Development
  • Geographic Information Systems
  • Electrical Engineering
  • Android Enthusiasts
  • Information Security
  • Database Administrators
  • Drupal Answers
  • SharePoint
  • User Experience
  • Mathematica
  • Salesforce
  • more (14)

  • Photography
  • Science Fiction & Fantasy
  • Graphic Design
  • Seasoned Advice (cooking)
  • Home Improvement
  • Personal Finance & Money
  • Academia
  • more (10)

  • English Language & Usage
  • Skeptics
  • Mi Yodeya (Judaism)
  • Travel
  • Christianity
  • Arqade (gaming)
  • Bicycles
  • Role-playing Games
  • more (21)

  • Mathematics
  • Cross Validated (stats)
  • Theoretical Computer Science
  • Physics
  • MathOverflow
  • more (7)

  • Stack Apps
  • Meta Stack Exchange
  • Area 51
  • Stack Overflow Careers
  • site design / logo © 2015 stack exchange inc; user contributions licensed under cc by-sa 3.0
    with attribution required

    rev 2015.4.17.2486

    foreign exchange – When and how should I pay taxes on ForEx …

    Laisser un commentaire