Yesterday, the Attorney General gave approval for the publication of new voluntary disclosure procedure that will enable Israelis who up to now have concealed wealth from the state and not paid taxes to make a report and pay the tax they owe without the fear of criminal proceedings. The procedure is especially relevant for people who deal in cryptocurrencies, who up to now have had difficulty in regularizing their profits from the point of view of reporting and taxation, Israel Tax Authority director Shay Aharonovich announced today at the Israel Democracy Institute’s Eli Hurvitz Conference on Economy and Society.
"As for as we are concerned, the procedure is intended first and foremost for holders of cryptocurrencies who have been in a difficult position in recent years on the issue of disclosure," Aharonovich said. "The now procedure, together with that of the Bank of Israel (allowing cryptocurrency to be deposited in the banking system, subject to certain conditions, E. L-W.) will, I hope, make it possible to make disclosure, and bring in handsome sums to the State of Israel over the next eighteen months."
Aharonovich said that the voluntary disclosure procedure would be in operation until the end of 2025, but added that it would be the last, and thus the final opportunity for Israelis who have failed to report assets and income to do so with reduced fines and protection from criminal prosecution.
"One of the conditions set by the Attorney General was that this would be the last time that there would be voluntary disclosure, and we will abide by that," Aharonovich said. "We shall introduce legislation that will clearly set out the fines for those who report late, and that will be the norm form here on."
One of the main problems for cryptocurrency players is that in many cases the commercial banks in Israel will not accept money arising from virtual currencies, because of the difficulty in tracing the source of the money, and the fear that it may be connected to money laundering or terrorism financing. In such cases, the refusal also applies to taxes on the realization of virtual currencies.
A procedure was recently published enabling cryptocurrency players to pay tax even on money that the banks refuse to accept, directly to the Tax Authority. With the publication of the new voluntary disclosure procedure, it may be that profits that have not been reported at all will now be revealed to the Tax Authority, and that the taxes on them will be paid.
The Tax Authority collected NIS 153 million in a voluntary disclosure scheme that ended in 2019, and over NIS 3.5 billion in a scheme that was in force between 2014 and 2016. Under the current procedure, it expects to collect NIS 2-3 billion.
Comprehensive plan for taxation of high-tech
Aharonovich also spoke about legislation being advanced to give greater certainty on taxation to investors in the technology sector.
"The entire management of the Ministry of Finance and the Israel Tax Authority together with the chief economist and Budgets Commissioner Yogev Gradus will present to the minister and the director-general a comprehensive plan for high-tech and the creation of certainty for investors," Aharonovich said, adding, "The minister of finance needs to consider Pillar Two (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 the international companies that invest in Israel. We shall provide certainty on the valuation of intellectual property of technology companies, and allow relaxations on structural changes to facilitate structural changes even when the value of the companies in which the change of structure takes place is higher than the law allows. In addition, we shall provide certainty on the issue of ‘a permanent establishment’ of an international company, so that we will truly enable foreign funds to invest here without being in constant fear that they will be taxed here on their entire income.
"All these things should lead to higher tax collection in the coming years and make it possible to deal with what worries us, which is the growth in expenditure in the 2025-2026 budget because of the defense budget, and at the same time provide certainty so that investors will not only remain here, but will also come here. We see that as one of the main roles of the taxation system in Israel," Aharonovich.
Published by Globes, Israel business news - en.globes.co.il - on May 21, 2024.
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