Digital currency owners in Israel must disclose their holdings to the tax agency of the country, a new report has been published. The Israeli Tax Authority sent letters to these owners, reminding them to pay their digital currency taxes.
The report by the Hebrew-language newspaper Globes revealed that the tax collector has been closely evaluating the digital currency industry in recent months. This has been the result of the growing need for extra revenue from the Israeli government and the increase in prices for most digital currencies.
The Tax Authority sent inquiries to local and global exchanges, urging them to disclose information about Israeli digital currency owners. Following the application of the EU Common Reporting Standards, the Authority also received data from other European nations on Israeli accounts and funds. In addition, a bilateral agreement with the IRS allows the Agency to receive financial information from the United States on Israelis.
Globes reports that the Agency sent letters to digital currency owners, similar to those sent by the IRS in 2019.
“We have information about your activities that does not match your tax return,” the letters tell their recipients. The tax agency then goes on to inform the recipient that it has been collecting data from exchanges that indicates he is not meeting his tax obligations.
“Most players ‘get the message’ and run to their representatives—lawyers and accountants—to look into how they should report,” the paper reports.
According to local tax expert Leor Nouman, the agency is only ‘fishing’ with its latest efforts. Speaking to Globes, he claimed that the letters are framed in the “just tell us what you’ve got before we come for you” format.
It’s best for Israeli traders to pay taxes, as the government will get to them sooner rather than later, advises yet another tax expert. Gidi Bar-Zakay, the founder of the Bittax digital currency tax platform, has revealed that authorities in Israel and beyond have collected tonnes of information on digital currency taxation. They are now acting on this information and prepared to crack down on those who fail to comply.
He stated, “With the right technology, using an address, it’s possible to trace the entire wallet, and even reach wallets and platforms that haven’t been properly reported. This leads to a significant increase in tax collection from those who have already filed returns, as well as those who haven’t.”
The Israeli government made its position known three years ago—digital currencies are a form of property and are subject to 25% taxation. In addition to their liability for capital gains, an additional 17 per cent of the VAT rate is charged to the block reward miners.
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