The tax collector, the Israel Tax Authority (ITA), has reportedly notified dozens of Israelis who own digital currencies, asking them to fully disclose their assets and be taxed accordingly. In addition to sending letters to local citizens, the tax authority has also directed inquiries to cryptocurrency exchanges in Israel and outside the country.
Data transfer
Reports of the tax collector’s notifications and inquiries were preceded by Israeli media speculation that tax officials across the country were “putting pressure on the digital currency market”. As Globes now reports, however, the ITA would like “to receive information about the Israelis’ trade in these currencies”. Before sending notices and inquiries to crypto exchanges, the Israeli revenue collector had received “data on the Israelis’ European-based funds and accounts”.
Israel receives this data in accordance with the EU’s Common Reporting Standards (CRS) for automatic exchange of financial account information. Similarly, the Israeli tax collector is said to have made a different arrangement with his counterpart in the United States. The report explains:
Additional information comes from the FATCA agreement that transmits the US Internal Revenue Service (IRS) data to Israel.
Meanwhile, the Globes report seeks to link the “renewed interest” in taxing cryptocurrencies with the resurgence of digital currency, particularly the jump into Bitcoin, and the intense need to fill state coffers.
Capital gains tax
Prior to his recent interest in taxing cryptocurrency holders, the ITA had published its position on cryptocurrencies back in 2018. According to this published document, Israeli “digital currency investors are subject to capital gains tax of 25% as long as their activity does not become a trading company. “
In the case of a commercial activity, however, the owners are charged a two-tier corporate tax or a marginal tax according to the individual tax brackets. Meanwhile, according to the Globes report, letters from the Israeli tax authority to Israeli crypto holders are intended to encourage them to voluntarily “report their income before the tax authority reaches them”.
What do you think of the tax letters that the tax authorities in Israel send to crypto owners? You can share your views in the comments section.
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