As cryptocurrency investments become increasingly popular, the voluntary disclosure procedure for crypto has become highly relevant. The value of the market and its currencies continue to break new records. This trend has not bypassed Israeli investors, with a growing number of Israelis investing in cryptocurrencies and generating significant profits.
A considerable number of investors fail to report these profits for various reasons. It is important to remember that all income of an Israeli resident must be reported in Israel. Failure to report and pay taxes constitutes a criminal offense, even if not done intentionally.
At the same time, the enforcement efforts of the Israeli Tax Authority are intensifying. Reports are frequently published about taxpayers approached by the Authority on suspicion of concealing crypto-related income. For example, in early 2025, it was reported that an Israeli resident who concealed 35 million NIS in crypto income would be prosecuted. A few weeks later, it was reported that an Israeli poker player was suspected of tax evasion, partly through the use of cryptocurrency.
To avoid criminal exposure, taxpayers must regularize their reporting with the Israeli authorities. One way to do so is through the voluntary disclosure procedure. The current procedure was published on August 25, 2025, and will remain in effect until August 31, 2026. The new procedure applies to income from several sources, including crypto income.
Regularizing Tax Liabilities – Voluntary Disclosure for Crypto 2025
The consequences of failing to report and pay taxes are severe. Penalties range from monetary fines to actual imprisonment. Therefore, it is strongly recommended to resolve the matter with the authorities. One option is to submit a voluntary disclosure request.
The voluntary disclosure procedure is not permanent but is published periodically. The new procedure, effective from August 25, 2025, until the end of August 2026, applies to the regularization of income from multiple sources, including crypto assets such as Bitcoin.
As part of the voluntary disclosure process, the taxpayer submits a request to the Tax Authority along with the relevant supporting documents. If the request meets the threshold requirements outlined in the circular, it is referred to one of two tracks: the “Green Track” or the “Regular Track.” The taxpayer does not choose the track; it is determined based on the details of the case.
- Green Track – A simpler and faster process, usually involving the filing or correction of tax returns. This track is available if the total income during the disclosure period did not exceed 500,000 NIS and the total value of assets as of December 31, 2024, did not exceed 1.5 million NIS.
- Regular Track – A more complex process that includes tax assessment discussions and negotiations with the assessing officer. Cases that do not meet the conditions of the Green Track are referred to the Regular Track.
For example, a taxpayer whose assets on December 31, 2024, were valued at 1 million NIS and whose profits were 200,000 NIS would fall under the Green Track. However, if the profits were 600,000 NIS, the case would be referred to the Regular Track.
The main advantage of the voluntary disclosure procedure is the criminal immunity granted to the taxpayer. In other words, the Tax Authority cannot initiate criminal proceedings against them, only civil proceedings. Furthermore, information submitted within the framework of an approved disclosure, once the tax has been paid, cannot be used against the taxpayer. Even in certain cases where the request is not approved, the information provided cannot serve as evidence in criminal proceedings on the matter.
From previous procedures, we have seen that the Tax Authority does not limit itself to bringing taxpayers into the tax system, but also examines potential money laundering aspects. In practice, this has meant that the Authority requested proof of the source of funds. If it was not convinced that the funds were legitimate, tax was imposed on the principal as well. The tax imposed was usually 10%–15%, and in exceptional cases, 50%. We assume this approach will continue under the new procedure.
Ongoing Reporting of Crypto Income
After regularizing past crypto income, a taxpayer who continues to have income derived from crypto must report it to the Tax Authority. To clarify the correct reporting method, the Authority published Circular 5/2018, which addresses the taxation of crypto income and discusses issues relating to income tax and VAT.
To read more about crypto taxation, click here.
Key Points for the Future
In light of the publication of the new procedure, it is important to note several key points:
- Voluntary disclosure before a proactive approach by the Tax Authority – The Authority often uses a “carrot and stick” method. Previous voluntary disclosure procedures offered taxpayers a limited-time opportunity to regularize unreported income before enforcement measures began. For example, the 2014 procedure was published about a year and a half before the Authority announced that it had obtained information on countless Israelis holding Swiss bank accounts. From there, the path to criminal proceedings against non-reporting taxpayers was very short. Therefore, it is advisable to regularize tax liabilities as soon as possible.
- Voluntary disclosure outside the formal procedure – In practice, it is possible to regularize unreported income, including crypto income, even without a formal voluntary disclosure procedure. This can be done through tax assessment discussions with the Authority and by signing a settlement agreement at the end of the process.
Reporting crypto income can raise professional dilemmas (e.g., whether the income is business or capital in nature, VAT liability, etc.) as well as technical challenges (collecting data from the blockchain, tracing transactions, etc.). Therefore, it is recommended to seek assistance from experts in the crypto field.
Nimrod Yaron & Co. includes attorneys and CPAs specializing in the crypto sector, assisting taxpayers with voluntary disclosure procedures in this area. We would be pleased to assist with any matter related to regularizing reporting with the Tax Authority. To contact a team member, please click here.
*The above does not constitute investment advice and does not replace comprehensive professional advice in the field of taxation and investments.
Does the reporting obligation apply to those who held crypto but did not realize it?
As of 2025, there is no such obligation. However, reporting is required if certain actions were taken, such as converting to other cryptocurrencies or converting to stablecoins like USDT.
Can a voluntary disclosure request be submitted anonymously?
No. Under the new procedure, submission is only possible through the online system.
Can a voluntary disclosure request be submitted if the Tax Authority has already initiated an investigation?
No. One of the conditions of the circular is that no open or covert investigation is being conducted against the taxpayer.
