Israeli Pair Guilty of $2.2M NFT Tax Evasion
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An editor at Coincrop
10 Mar 2023 | 5 min read
n Israeli pair have been convicted of a major NFT tax fraud scheme worth $2.2 million, with evidence showing that they profited from the sale of an NFT derived from a 3D scan of the Western Wall -- one of Jerusalem's most important religious sites.
Israel's Tax Authority in Jerusalem is conducting an inquiry into a pair of NFT creators for potential tax avoidance.
According to The Jerusalem Post, Avraham Cohen from Jerusalem and Antony Polak of Har Adar are suspected of not declaring income totalling 8 million Israeli New Shekels (NIS) originating from the sale of a Non-Fungible Token based on a 3D scan of the renowned Western Wall.
Through the website holyrocknft.com, the suspects had sold 1,700 NFTs since 2021 and acquired an approximate total of 620 Ethereum for their works - which was equivalent to about 8 million Israeli Shekels in payment at the time. Despite this huge, combined sum, they neglected to report them as business earnings from their transactions.
The suspects were released; however, they were restricted under certain conditions such as turning over their digital wallets in which the Ethereum is held. According to The Jerusalem Post, although they are currently being investigated, legal procedures have not yet been taken into action.
Israel typically taxes capital gains at 25%, however, if the expense is classified as a business expenditure, it can be subject to up to 53% in taxes. NFTs (Non-Fungible Tokens) and other forms of crypto assets must adhere to this taxation law when their profits or losses are realized.
Cryptocurrency conversions to traditional currencies can be used as a tax tool, with the difference between amounts paid and purchased being utilized for taxation.
This is far from being the first incident involving NFT creators being probed for tax evasion in Israel. Recently, Ben Benhorin—a graphic designer based in Tel Aviv who goes by the pseudonym WUWA on Opensea International and makes and trades NFT art—was arrested for failing to declare his income of around 3 million Israeli shekels as well as 30 Ethereum-type digital currencies that he was paid with.
After careful scrutiny, it became apparent that the defendant had neglected to declare their profits from sales on the platform in their 2021 tax documents. Allegedly, they had gone as far as converting some of the cryptocurrency received for selling an NFT into other currencies using Uniswap - a feat undetected by authorities and thus untaxed. Such activity warrants taxation just like any other sale would.
JonathanAn editor at Coincrop
Jonathan is a Coincrop staff writer based in the UK, covering the best rates for cryptocurrency earning and borrowing products. When not at work, he's likely sailing.
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