Israeli tax agencies are eyeing the digital currency market for tax purposes as a recent report in Globes revealed that the tax authorities are sending out notices to cryptocurrency owners in the country asking them to fully disclose their holdings so that they can be taxed accordingly. The report further revealed that the tax authorities have sent out notices to several crypto exchanges operating within the country as well as outside the country to get a detailed report on Israelis trading digital assets across the world.
Adv. Leor Nouman, chairman of the tax practice group at the law firm S. Horowitz & Co believes the authorities are going behind cryptocurrency holders because of the recent Bitcoin bull rally, believing many citizens would have cashed out in the wake of record bitcoin price. He explained,
The Tax Authority renewed its interest in this area recently as a result of two factors: lack of money and a desire to fill the public coffers, where this resource could help. The second main consideration is that Bitcoin has rallied. The Tax Authority’s working assumption is that, as Bitcoin has hit $20,000, quite a few traders must have cashed out, and the Authority assumes it can lay its hands on quite a bit of money.”
Bitcoin Hodlers are Primary Target
The Israeli tax authorities have sent out notices to several crypto holders as well as crypto exchanges, but it seems Bitcoin holders are their primary target owing to the money involved. Nouman revealed that the ongoing notices are just the initial stages and an increased government tax enforcement might be on the cards as the popularity of bitcoin continues to soar this bull season.
“Recently, the Tax Authority approached customers who are significant Bitcoin players. One of them has no income tax file at all while the other one does. The Tax Authority asked them general questions about declaring their assets, though it’s clear they’re targeting the Bitcoin because it’s their main asset.
Back in 2018, the Israeli government had passed a regulation according to which digital currencies are subjected to 25% capital gain tax un the holder of the asset is involved in a commercial enterprise. In case the digital asset holding is generated through an enterprise business, the individual would be liable to two-stage corporate tax depending on the tax bracket.