Tech
Head of Tax Authority Announces Cryptocurrency Disclosure and Tech Tax Reform
Yesterday, the Attorney General approved the publication of a new voluntary disclosure procedure that will allow Israelis who have so far hidden wealth from the state and failed to pay taxes to report and pay the taxes owed without fear of criminal prosecution. The procedure is particularly relevant for those who trade in cryptocurrencies, who have so far had difficulty regularizing their profits from the point of view of reporting and taxation, Director of the Israel Tax Authority Shay Aharonovich announced today at the Eli Hurvitz conference of the Israel Democracy Institute. Economy and society.
“As far as we are concerned, the procedure is intended first of all for cryptocurrency holders who have found themselves in a difficult position on the issue of disclosure in recent years,” Aharonovich said. “The current procedure, together with that of the Bank of Israel (which allows the deposit of cryptocurrency in the banking system, under certain conditions, E. LW.) will, I hope, make it possible to disclose and acquire significant sums to the State of Israel in the next eighteen months.”
Aharonovich said the voluntary disclosure procedure will be operational until the end of 2025, but added that it will be the last, and therefore the last opportunity for Israelis who have not reported assets and income to do so with reduced fines and protection from criminal proceedings.
“One of the conditions set by the Attorney General was that this would be the last time there would be voluntary disclosure, and we will abide by that,” Aharonovich said. “We will introduce legislation that will clearly set out fines for those who report late, and this will be the norm from here on.”
One of the main problems for cryptocurrency players is that in many cases commercial banks in Israel do not accept money derived from virtual currencies, due to the difficulty in tracing the source of the money and fears that it may be linked to money laundering. or terrorist financing. In such cases the refusal also applies to taxes on the creation of virtual currencies.
A procedure was recently published that allows cryptocurrency players to pay taxes even on money that banks refuse to accept, directly to the tax authorities. With the publication of the new voluntary disclosure procedure, it is possible that undeclared profits will now be revealed to the tax authority and tax will be paid on them.
The Tax Authority collected 153 million shekels in a voluntary disclosure scheme that ended in 2019 and over 3.5 billion shekels in a scheme in place between 2014 and 2016. Under the current procedure, it expects to collect 2-3 billion shekels.
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Aharonovich also spoke about advancing legislation to give more tax certainty to tech investors.
“The entire management of the Ministry of Finance and the Israel Tax Authority together with Chief Economist and Budget Commissioner Yogev Gradus will present to the Minister and the Director General a comprehensive plan for high technology and creating certainty for investors, ” Aharonovich said, adding: “The finance minister must consider Second pillar (the “Global Minimum Tax”) – whether it will apply and, if so, when and how it will apply.
“We intend to provide certainty on transfer pricing, something that is of great concern to international companies investing in Israel. We will provide certainty on the valuation of intellectual property of technology companies and allow relaxations on structural changes to also facilitate structural changes when the value of company in which the change in structure occurs is higher than what is permitted by law. Furthermore, we will provide certainty on the issue of the “permanent establishment” of an international company, so as to truly allow foreign funds to invest here without having the constant fear of being taxed here on their entire income.
“All this should lead in the coming years to increased tax collection and allow us to address what worries us, which is the growth of expenditure in the 2025-2026 budget due to the defense budget, and at the same time provide certainty so that investors not only stay here, but also come here. We consider this one of the main roles of the tax system in Israel,” Aharonovich.
Published by Globes, economic news from Israel – en.globes.co.il – May 21, 2024.
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