Tax agencies keep on pressurizing crypto related companies to make their operations visible to them. The latest example to consider is from Israel, where the Tax Authority convinces the local exchange “Bits of Gold” to report transactions exceeding $50,000 over the last 12 months.
Bits of Gold to Report to Tax Authority
Under the terms of the agreement, “Tel Aviv-based exchange Bits of Gold has agreed to report on its ‘heavy’ users to the Israel Tax Authority (ITA), after the authority carried out an on-site inspection of its operations at the exchange’s offices, targeting details on its bigger clients”- according to local news source Calcalist.
While Israeli law states that financial brokerages are entailed to pass on information of large suspicious transactions to the Israel Money Laundering and Terror Financing Prohibition Authority (IMPA), they aren’t necessarily compelled to do the same with the tax authority due to privacy concerns.
As a result, for precedent, an Israeli court refused a request by the tax authority to collect a client list from a bankrupt bank since that information is protected under privacy laws.
Bits of Gold
Bits of Gold is one of the largest cryptocurrency exchanges for Bitcoin and Ethereum in Israel. In June 2017, it dragged one of the country’s biggest banks to court and lost.
Tomer Niv- Chief Growth Officer of Bits of Gold, said:
“Since we established the company in 2013 and as the largest cryptocurrency broker in Israel, we are working together with the various regulators to help formulate the rules for the cryptocurrency industry and to comply with them”.
The agreement between the Bits of Gold and Tax Authority is a significant development. As the ITA has no legal powers to obligate any exchanges operating in the country to report on their clients.
The ITA first issued tax guidelines for virtual currencies in early 2017. All cryptocurrencies have been deemed as assets. Wherein bitcoin miners and retail investors are levied fixed business tax rates.
Meanwhile, individual investors were asked to cough up the capital gains tax rate of 25% for profits from digital trading. The exchanges are also required to levy a 17% VAT on their clients.
Squeezing Majority of Investors
According to the reports, this agreement with Bits of Gold is an indication of things. The ITA is planning to reach more local companies and exchanges approaching similar arrangements. As a result, this incident is just the latest initiative by the ITA in the crypto field.
Back in May, the news came that regional branches approached those they suspect are trading bitcoin, enquiring that the recipients divulge all of their involvement in the crypto market including all past transaction history with current holdings.
Moreover, the users were asked to list all exchange accounts with wallets they ever had including their trade earnings. Additionally, the agency asked people to reveal if they are engaged in crypto mining.
The authority is double down on its position, to find out crypto investors who are subject to capital gains taxes. The tax authority has also narrowed down on fundraising via initial coin offerings (ICOs) in recent months.
Should exchanges agree to share their client’s information under difficult circumstances? What you think is this action going right for us?
Image Source: Israel