Israeli Tax Authority to Receive Customer Info from Cryptocurrency Broker

The Israeli Tax Authority continues to hunt for money laundering activity via Cryptocurrencies Cryptocurrencies By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw Read this Term by coming to an agreement with cryptocurrency Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term Bits of Gold, according to local news source Calcalist.

Under the terms of the agreement, the firm must give the Israel Money Laundering and Terror Financing Prohibition Authority access to the data of customers that make more than $50,000 in 12 months.

As the agreement stands, the data may not necessarily be transferred to the tax authority because of complex laws protecting customer privacy.

Bits of Gold

Bits of Gold is one of the larger cryptocurrency exchanges in Israel, with 50,000 registered customers.

In June 2017, it took one of the country's biggest banks to court and lost. Bank Leumi had decided to stop servicing the company's account, arguing that it could not follow its own anti-money laundering guidelines because of the anonymity of cryptocurrency. Despite the fact that Bits of Gold had itself followed KYC procedures, the Tel Aviv district court ruled in favour of the bank.

Eight months later, Israel's supreme court took the opposite decision. It discovered that the bank had classified the exchange as a gambling site for its own internal procedures, rendering its decision invalid. It issued a temporary court order prohibiting the bank from limiting the bank account of Bits of Gold in any capacity.

Tomer Niv, Chief Growth Officer of Bits of Gold, said to Finance Magnates: "Since we established the company in 2013 and as the largest cryptocurrency broker in Israel, we are working together with the various regulators in order to help formulate the rules for the cryptocurrency industry and to comply with them.

We understand that following the publication of the tax authority's circular, the ITA has begun to act in a wide-ranging manner vis-à-vis the cryptocurrency market in Israel.

We at Bits of Gold only transfer the information we are required by law, which is still in the hands of the Israel Money Laundering and Terror Financing Prohibition Authority, in order to protect the privacy of customers on the one hand, and the provisions of the law on the other. "

Cryptocurrency tax in Israel

The Israeli Tax Authority (ITA) published guidelines concerning distributed means of payment in February.

The authority has represented in the past that it considers cryptocurrency to be property, and in keeping with this, it taxes cryptocurrency as it does any other transacted commodity.

Capital gains tax is paid on all profits from traded cryptocurrency, and cryptocurrency mining operations are taxed at standard rates of income tax as with any other business.

Private investors do not have to pay VAT because cryptocurrency is an intangible asset, but operations which reach the level of an enterprise - exchanges, mining businesses - are liable to pay VAT.

ICOs are still under discussion.

Sources familiar with the matter told Calcalist that the Israeli Tax Authority is putting an emphasis on examining cryptocurrency investors, and the development does not necessarily mean that Bits of Gold customers are suspected of anything.

The ITA does not have legal recourse to force companies to share customer information - this has been precedent since 2002 - but it expects companies to comply because it is in their own interest to be seen as legitimate businesses.