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The revenue recipient, the Israeli Revenue Service (ITA), has reportedly sent reports to dozens of Israelis who own digital currency, requesting that their assets be fully disclosed and taxed accordingly. In addition to sending letters to local citizens, the tax authorities have also sent inquiries to cryptocurrency exchanges operating in Israel and located outside the country.

Sharing of data

Reports of the notices and inquiries sent out by the income provider were preceded by speculation in the Israeli media that tax experts across the country were “putting pressure on the digital currency market.” But as Globes is now reportthe ITA wants to “obtain information on Israelis trading in these currencies”. Before sending notices and inquiries to crypto exchanges, the Israeli revenue collector received “data on Israelis’ European-based funds and accounts.”

Israel receives this data in accordance with the “EU Common Reporting Standards (CRS) regulations for the automatic exchange of financial account information.” Likewise, the Israeli tax collector would have made a different arrangement with its counterpart in the United States. The report explains:

Additional information comes through the FATCA agreement, which transmits US Internal Revenue Service (IRS) data to Israel.

Meanwhile, the Globes report tries to link the “renewed interest” in the taxation of cryptocurrencies “with the resurgence of digital currencies, especially the jump in bitcoin, along with an intense need to fill the state coffers.”

Capital gains tax

Still, prior to its latest interest in taxing cryptocurrency holders, the ITA had published its position on cryptocurrencies in 2018. According to that published document, Israeli ‘digital currency investors’ are subject to a 25% capital gains tax as long as their activity does not turn into a commercial venture. “

However, if this becomes a commercial activity, “the owners will pay a two tier corporate tax, or a marginal tax according to the individual tax brackets.” In the meantime, according to the Globes report, the Israeli tax authorities’ letters to Israeli crypto holders are intended to encourage them to voluntarily “report their income before the tax authorities approach them.”

What do you think about the tax letters that the tax authorities in Israel send to crypto holders? You can share your thoughts in the comments section.

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