This Move Could Save Israeli Crypto Investors Millions
The deputy head of Israel’s tax bureau has announced that the government is prepared to accept alternatives to the first in, first out (FIFO) system for taxing cryptocurrency-related earnings. Experts say the move could save investors big money on their tax bills.
Per media outlet Calcalist, Roland Am-Shalem, the Deputy Director General of the Israel Tax Authority (ITA), told a Tel Aviv blockchain conference that investors would instead be allowed to choose to how they pay their taxes rather than using the FIFO calculation method – which critics say often over-taxes investors.
Am-Shalem stated that investors could opt out of FIFO taxation calculations, which match the value of the assets of tokens to those that are most recently purchased. FIFO calculations are essentially estimations – used in cases where tax authorities have trouble estimating the precise value of assets. Cryptocurrencies are recognized as “assets” in Israel, meaning they have financial value – but not as “currencies,” which can lead to legal confusion over their precise worth.
Some experts say the imprecise nature of FIFO accountancy has resulted in Israeli investors paying hefty bills on their crypto earnings, but the new announcement could potentially do away with this.
Media outlet The Marker quotes former ITA deputy chief Gidi Bar Zakay as saying, that doing away with FIFO will let investors instead “calculate their cryptocurrency profits accurately, resulting in a real tax calculation.”
This, says Bar Zakay, will “lead to profits worth hundreds of millions of shekels [1 ILS = 0.27 USD] over the years.”
Am-Shalem, however, insisted that such “real tax calculation” declarations would need to be backed up with proof – like blockchain-verified times and dates of purchase. He also insisted that such calculations would need to show “consistency” if they were to be accepted.
The move has been welcomed by crypto experts in the country.
The Marker quotes an accountant specializing in cryptocurrency matters as saying that flexibility will allow many investors to pay less tax. The accountant said, “Quite a few of our customers have actually received tax rebates using the FIFO method.” The accountant concluded that Am-Shalem’s announcement would allow investors and their accountants to choose a preferred calculation method based on their own individual situations.