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Israel: Tax Authority Notifies Cryptocurrency Owners of Tax Obligations

(Dec. 13, 2018) The Israel Tax Authority (ITA) has recently notified hundreds of Israelis it has identified as receiving income from cryptocurrency that they are required to report on their transactions in bitcoin and other cryptocurrency. The ITA does not consider cryptocurrency as currency but rather as assets subject to property tax at a rate of 25–30%. (Omri Milman, Tax Authority Identifies Bitcoin Tax Evaders, CALCALIST (Dec. 5, 2018) (in Hebrew).)

To identify cryptocurrency owners the ITA has reportedly contacted cryptocurrency exchanges, such as Bits of Gold—one of the largest platforms in Israel for trade in bitcoin and Ittrium—and other bodies for information on cryptocurrency owners. The ITA has also reportedly sent warning notices requesting transaction reports and tax payments to Israelis suspected of earning unreported income. The ITA has based its suspicions on criteria that includes frequent international travel and ownership of more than three real estate assets. (Id.; for additional information on taxation of cryptocurrency in Israel, see Israel, in Law Library of Congress, Regulation of Cryptocurrency Around the World 84–85 (June 2018).)