Israeli Bitcoin investors are unable to pay their taxes as banks aren’t accepting deposits obtained from cryptocurrencies.
Israeli Bitcoin (BTC) investors are unable to pay their taxes as banks do not accept deposits obtained from cryptocurrencies.
Israeli banks freeze up the minute they hear Bitcoin
Israeli newspaper Haaretz reports on Aug. 6 that local crypto investors are unable to deposit the returns of their Bitcoin investments into bank accounts due to money laundering and terrorist financing concerns. Bitcoin is not recognized as a currency in Israel and earnings made by trading them are subject to a 25% capital gains tax for individuals and a 47% corporate tax rate for corporations.
Those two factors reportedly result in the Israel Tax Authority expecting taxes from Bitcoin investors, who find themselves incapable of paying them since they cannot deposit the earnings resulting from their investments as local fiat currency onto local bank accounts. The outlet outlines the experience of local BTC investor Ron Gross, who invested in the coin in 2011 and reported his earnings to the local tax authority.
In 2017, his bank, Hapoalim, reportedly started refusing to allow him to deposit his Bitcoin trading profits into the account. Gross also met with bank officers and showed them 70 pages of deposit records of Bitcoin earnings, but the bank continued to refuse to accept the funds. He stated:
“I’ve tried working with almost all the banks, but the minute they hear the word ‘Bitcoin’ they freeze up.”
Tax authorities aware of the problem
Since he was unable to pay his dues to the Israeli tax authority, a lien has been put on his bank account, home, and scooters. He also declared that “the tax authority is aware of the problem, but they say the ball isn’t in their court.”
Haaretz further writes that the local tax collector is aware of 300 million shekels (over $85.7 million) in unpaid tax due on the earnings from Bitcoin and cryptocurrencies, but the figure is probably much higher.
The outlet also cites the case of Roy Arav, another Bitcoin investor who held his profits on a trustee account at Discount bank operated by local cryptocurrency exchange Bit2C. Still, Discount refuse to move the money from the trustee account to Arav’s personal account.
The reason behind the refusal is that the bank’s policy does not permit funds in client accounts deriving from distributed virtual currencies due to anti-money laundering and terrorist financing risks. Because of this, Arav could not pay his taxes and filed a lawsuit against the bank.
He also reportedly admitted that the tax authority understood the problem and let him delay paying until the lawsuit he filed could be ruled on. Lastly, the outlet admits that there are ways to circumvent the issue by buying shekels in the grey markets or move money through investment houses, paying high fees.
As Cointelegraph reported at the beginning of June, the Supreme Court of Israel has declared that Leumi Bank cannot block the local cryptocurrency exchange Bits of Gold’s account on the grounds of regulatory concerns.