Bitcoin (BTC) investors in Israel are reportedly unable to settle their taxes since banks don’t accept deposits originating from cryptocurrency transactions.
According to a report published by Haaretz on Aug. 6, Israeli Bitcoin investors are having a hard time depositing the profits of their crypto investments into their bank accounts thanks to terrorist financing and money laundering concerns.
Bitcoin doesn’t fit a legal definition of a currency
In May this year, an Israeli judge ruled Bitcoin is not a currency but an asset. According to the judgment, profits made by trading the asset are liable to a 25% capital gain tax. Moreover, institutions or firms selling virtual currencies are subject to a VAT tax at the rate of 17%. The judge argued that Bitcoin (BTC) as money could stop to exist and be replaced by another cryptocurrency. For this reason, it can’t be considered a currency, especially for tax purposes.
While the Israel Tax Authority (ITA) expects taxes from Bitcoin investors, the investors claim they are unable to pay them as they can’t deposit the profits earned from their crypto investments.
“I have tried working with almost all the banks, but the minute they hear the word ‘Bitcoin’ they freeze up,” said local BTC investor Ron Gross.
According to local investors, most banks do not allow funds originating from digital assets due to terrorist financing and money laundering risks. They added that tax authorities are aware of the problem but are doing nothing to address it.
Banks are within rights to decline deposits originating from cryptos
It is worth remembering that on the 17th of March 2019, an Israeli court ruled that banks cannot enforce a blanket ban against all accounts associated with virtual coins. The ruling also stated that banks can decline to offer services for clients dealing with cryptocurrencies if the bank has sufficient reasons to believe the client may be attempting to launder money.
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