Tax Authority chief heralds crypto disclosure, tech taxation reform

Yesterday, the Attorney General agreed to publish a new voluntary disclosure procedure that will enable Israelis who have so far hidden their wealth from the state and not paid taxes to file a report and pay the tax they owe without fear of criminal proceedings. This measure is especially suitable for people who deal in cryptocurrencies, who have so far had difficulty regulating their earnings from a reporting and taxation point of view, the Director of the Israel Tax Authority, Shai Aharonovitch, announced today at the Israel Democracy Institute's Eli Horvitz Conference on Economy and Society.

“For us, the measure is primarily intended for cryptocurrency holders who have been in a difficult situation in recent years regarding the issue of disclosure,” Aharonovitch said. “The current procedure, together with the procedure followed by the Bank of Israel (allowing the deposit of cryptocurrencies into the banking system, subject to certain conditions, E. L.W.), will, I hope, make it possible to expose these currencies, and bring handsome amounts to the State of Israel over the next eighteen months.

Aharonovitch said the voluntary disclosure measure would be in effect until the end of 2025, but added that it would be the last, and therefore the last chance for Israelis who fail to report their assets and income to do so with reduced fines and protection from sanctions. Criminal trial.

“One of the conditions set by the prosecutor is that this be the last time voluntary disclosure is made, and we will adhere to that,” Aharonovitch said. “We will introduce legislation that clearly sets out fines for those who show up late, and that will be the normal model from here on out,” he added.

One of the main problems facing cryptocurrency players is that in many cases commercial banks in Israel will not accept funds generated from virtual currencies, due to the difficulty of tracing the source of the funds, and fear that they may be linked to money laundering operations. Or financing terrorism. In such cases, the refusal also applies to taxes imposed on the sale of virtual currencies.

A procedure has recently been published that enables cryptocurrency operators to pay taxes even on funds that banks refuse to accept, directly to the IRS. With the publication of the new voluntary disclosure procedure, it is likely that profits that were never reported will now be disclosed to the IRS, and taxes will be paid on them.

The tax authority collected NIS 153 million in a voluntary disclosure scheme that ended in 2019, and more than NIS 3.5 billion in a scheme that was in effect between 2014 and 2016. Under the current procedure, it expects to raise NIS 2-3 billion.

A comprehensive plan to tax high-tech

Aharonovitch also spoke about legislation being introduced to give greater tax certainty to investors in the technology sector.

“The entire management of the Ministry of Finance and the Israel Tax Authority, together with Chief Economist and Budget Commissioner Yogev Grados, will present to the Minister and Director General a comprehensive high-tech plan and create certainty for investors.” “The finance minister has to take this into account,” Aharonovitch said Second column (“Global Minimum Tax”) – whether it will apply, and if so when and how it will apply.

“We intend to provide certainty on transfer pricing, which is of great concern to international companies investing in Israel. We will provide certainty on the valuation of intellectual property for technology companies, and we will allow mitigation of structural changes to facilitate structural changes even when the value of companies in which a change in structure occurs is higher than Allowed by law, in addition, we must provide certainty on the issue of “permanent establishment” of an international company, so that we can truly enable foreign money to invest here without the constant fear of being taxed here on their entire income.

He added: “All of these things should lead to higher tax collections in the coming years and make it possible to deal with what worries us, which is the growth in spending in the 2025-2026 budget due to the defense budget, while at the same time providing certainty.” So that investors will not only stay here, but will come here as well, and we see that as one of the main roles of the tax system in Israel.”

Published by Globes, Israel Business News – en.globes.co.il – on May 21, 2024.

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