And sometimes the celebration ends?

The Bitcoin Taxation Plan

While many are trying to figure out what a cryptocurrency is, the field is getting the final stamp on its centrality in the global economy, in the form of planning by US tax authorities to tax capital gains from virtual money.

Roast Greenberg

26/01/2022

Wednesday, 26 January 2022, 13:33 Updated: 17:02

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Want to redeem the bitcoin you bought?

Income tax behind you.

The rise in the exchange rate of virtual currencies, along with the frequent volatility, causes many Israelis to examine the sale of their cryptocurrencies, without being aware of the obligation to pay capital gains tax on them.

According to the Blobmarg website, the White House is planning a regulation regarding the field of crypto as early as this coming February, and is putting quite a few Israelis under pressure.

"If American policy enters into the issue," explains CPA Edward Kaufman, "there is a high probability that it will also be adopted in Israel.

But those Israelis carry with them the misconception that the crypto transactions they have made do not require reporting or are already being reported to the income tax.

This is after an amendment to the Anti-Money Laundering and Terrorist Financing Order came into force last mid-November, requiring trading platforms to report on transactions made within their framework.

So in practice, although there is still no complete regulation governing the issue, the identity of the trader is completely exposed, as virtual currency trading is now done through dedicated exchanges for crypto currency trading, which require full listing of their details.

"American regulation will tighten the rope around those who tried to evade money through crypto and avoid tax payments, and may lead the various tax authorities to allow virtual currency holders voluntary disclosure, under which they can avoid fines, and perhaps even pay less tax."

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Those who invested not only benefited from the price increases, but also hoped that the tax authorities would not demand their share (Photo: ShutterStock)

Monitoring of transactions by the tax authorities

"American regulation will tighten the rope around those who tried to evade money through crypto and avoid tax payments, and may lead the various tax authorities to allow virtual currency holders voluntary disclosure, under which they can avoid fines, and perhaps even pay less tax."

Income tax, however, does not try to put His hands are only on those who try to hide income through crypto, but on all crypto transaction operators. "A transaction in the field of cryptocurrencies is defined as any other transaction in the capital market," explains Kaufman CPA

. To me after being surprised to find out in their mailbox the requirement to file income tax returns, even though they are employees at all, and did not know how to handle it.

But self-employed people are also surprised to discover income tax demands for paying taxes on the crypto transactions they have made.

Although it is not possible to escape the payment of taxes, it is possible, desirable and worthwhile to examine whether the amount of the tax claim is justified.

One of those customers, for example, received a tax payment request and submitted a report himself, without taking into account several factors that lower the amount of tax he has to pay.

For example, he did not take into account the differences in currency exchange rates - the dollar, between Their sale, which can amount to a difference of hundreds and even thousands of shekels in paying tax, unnecessarily. "

CPA Edward Kaufman (Photo: courtesy of the photographers)

The good part: Losses can be offset

"For example, if 2 Bitcoin coins were purchased during December 2017 for about $ 38,000, sold at the end of 2021 for about $ 95,000, the tax will be calculated on a profit of $ 57,000. The amount of capital gains tax is 25% and therefore, the seller is required To pay $ 14.25 thousand in tax, which is about NIS 44,175,000 according to the dollar exchange rate at the time of the sale, which was about NIS 3.1 at the time

. NIS 1,000 less, which is about 10% of the tax required from it.

This is because at the time of purchase, the dollar exchange rate at the time of purchasing the Bitcoin coins was about NIS 3.5, which puts the purchase amount in shekels at NIS 133,000. NIS 294.5 thousand.

Therefore, the tax had to be calculated on an amount of NIS 161.5 thousand, which requires a tax of NIS 40.3 thousand, instead of the NIS 44.2 thousand that the seller paid to the actual income tax.

But not only the currency exchange rates need to be taken into account, but all the actions taken by the currency buyers during their years of maintenance.

For example, if there were stock losses or other losses in those years, they, too, should be reflected and offset by the same profit generated as a result of the realization of the cryptocurrencies. "

• Of money

Tags

• Bitcoin

• Crypto

• Virtual coins

• Income Tax