14 September 2026 · Taxation and digital assets
The bank refused the crypto proceeds. This is how the tax gets paid
Anyone who sold digital currency at a gain owes tax on it. In many cases the Israeli bank refused to accept the proceeds, and without a bank account there was no way to pay. The Israel Tax Authority opened a dedicated route, under which the tax is paid directly into the Authority’s account at the Bank of Israel, and recently extended it to the end of 2027. The route solves a real problem, and it carries reservations worth knowing before signing.
How the need arose
The difficulty began with the banks. A client who sold digital currency at a gain asked to deposit the proceeds in his account, and the bank refused, at times in a blanket refusal that was not examined on its merits. In 2018 Roi and Yifat Erev went to court over Mercantile Discount Bank’s refusal to allow them to deposit some two million shekels accumulated from the sale of bitcoin held for them by Bit2C. On 22 February 2021 the Tel Aviv Jaffa District Court, per Judge Limor Bibi, allowed the claim and held that the refusal was unreasonable.
The bank appealed. On 22 January 2023 the Supreme Court dismissed the appeal, before Justices Yitzhak Amit, Ofer Grosskopf and Alex Stein, on the ground that the appeal had become theoretical. In the meantime Proper Conduct of Banking Business Directive 411 had been formulated, under which a bank may not refuse across the board customers who ask to transfer to their account funds originating in trade in digital currency, and must examine each request on its merits. The court noted that when the respondents approached the bank at the end of 2017 and the beginning of 2018 the subject was still in its infancy.
Even after Directive 411 the deposit remained problematic in many cases, and the tax problem stayed as it was: the tax liability exists, and there is no practical way to pay it. Following a petition to the Supreme Court sitting as the High Court of Justice, the court was told that work on a procedure was at an advanced stage. On 28 June 2023 the petition was struck out with no order as to costs, before Justices Daphne Barak-Erez, David Mintz and Yechiel Kasher, the court noting its assumption that the work would be completed with appropriate speed and reasonable diligence, and that the arguments were reserved.
CC 51757-08-18 · CA 2963/21 · HCJ 8486/22
The route that opened
On 31 December 2023 the Israel Tax Authority published the temporary procedure for receiving tax payments on gains from the realisation of decentralised means of payment, initially from 1 January 2024 and for a period of six months. On 3 April 2024 Income Tax Execution Instruction 06/2024 was published, governing its implementation, and alongside it form 909, reporting of activity in virtual currency for the tax year.
The idea is simple. The tax money is deposited directly into a bank account of the Tax Authority held at the Bank of Israel, without passing through the commercial banking system. The deposit is made in shekels only, and the money is transferred from a foreign bank account, including an account of a crypto exchange, an investment house or another financial service provider held with a foreign bank.
Legislative update
On 31 August 2026 the Israel Tax Authority published a notice of a further extension of the procedure, to 31 December 2027. This is the fifth extension, and the longest of them: sixteen months, against six to twelve in the earlier ones.
| Date of publication | In force until |
|---|---|
| 31 December 2023, the temporary procedure | 30 June 2024 |
| 1 July 2024 | 31 December 2024 |
| 1 January 2025 | 31 December 2025 |
| 30 December 2025 | 31 August 2026 |
| 31 August 2026 | 31 December 2027 |
The threshold condition
The procedure is not an alternative payment route for everyone. It applies only to tax money on activity in decentralised means of payment, and only where it has been proved to the Tax Authority that the commercial banking system in Israel, at least one bank, refused to accept it, including by refusing to open an account. A person whose bank is willing to accept the funds does not come within the procedure, and has no need of it.
Five stages
1Filing. The taxpayer files form 909 for each tax year separately, with his identifying details, an affidavit, and consent to everything laid down in the procedure. The form is filed with the assessing officer as part of the annual return, and may also be filed in a full online annual return.
2Determining the tax. The assessing officer determines the tax liability on the taxable income originating in the digital currency, in an assessment agreement under the provisions of section 145 of the Income Tax Ordinance, in accordance with the alternatives laid down there. The procedure may also apply to income declared in a return for which no assessment has yet been made. Where the application is refused, a reasoned letter of refusal is sent.
3Review. The details are passed to the senior department manager, disclosure of unreported capital, whom the procedure calls the examining officer. He verifies that the full documentation and data have been received.
4Investigations. The Deputy Director for Investigations, together with other authorities, examines the taxpayer in order to reduce the risk of money laundering and to reduce the suspicion that the funds originate in unlawful activity.
5Collection. The Deputy Director for Collection Enforcement notifies the Bank of Israel that the application meets the conditions, issues an approval for the deposit of the funds, and updates the taxpayer.
The documentation required
Three kinds of documentation. The first concerns the source of the funds used to buy the virtual currency. The second is the path of the virtual currency, that is the movements made in the coins or in the wallet address in which they were placed, throughout the holding period. The third is confirmation from the financial service provider through which the sale was made, of the deposit of the proceeds into the account. A person who held coins for years, in several wallets and on several exchanges, will find that gathering the evidence is the long part of the process, not the forms.
Four reservations worth knowing before signing
Tax paid is not refundedThe tax paid under the procedure will not be refunded to the taxpayer even where he is entitled to refunds, losses, deductions or credits that were not reflected in the assessment agreement or in the self assessment. Anyone with open capital losses or foreign tax credits should make sure they enter the assessment itself, because after payment they are lost.
The assessment agreement gives no immunity from criminal proceedingsThe Tax Authority notice of 31 December 2023 stated that the assessment agreement would make clear that signing it has no effect on criminal proceedings under the Income Tax Ordinance or under any other law. The procedure is a payment route, and not an immunity arrangement.
There is no objection route against a refusalThe procedure provides that a refused application receives a reasoned letter of refusal, and it says nothing about any possibility of objecting or appealing against the refusal. A person whose application is refused is left with a tax liability he has no way of paying, and with no ordered route of objection.
The identity of the examining authorities is not specifiedThe examination stage is carried out by the Deputy Director for Investigations “together with the other authorities”. The procedure does not say which they are. The taxpayer is required to consent in advance to a process whose participants are not known to him.
The scope of the procedure and its limits
The procedure governs the manner in which the tax is paid. It does not govern the reporting of income that was not reported. The voluntary disclosure procedure, which dealt with regularising unreported capital and income, ended on 31 August 2026, and the Tax Authority has said it is not currently planning a further one.
The provisions, conditions and reservations of the procedure raise questions of assessment, limitation, representations and undertakings, waiver of confidentiality, set off of losses, deductions and credits. Those are examined before form 909 is filed, not afterwards.
Questions and answers
Who can use the crypto tax payment procedure?
A taxpayer with tax due on activity in decentralised means of payment, where it has been proved to the Israel Tax Authority that at least one bank in the Israeli commercial banking system refused to accept the funds, including by refusing to open an account.
Where is the tax paid?
Directly into a bank account of the Israel Tax Authority held at the Bank of Israel, in shekels only, transferred from a foreign bank account, including an account of a crypto exchange, an investment house or another financial service provider held with a foreign bank.
Until when is the procedure in force?
Until 31 December 2027, under the Tax Authority notice of 31 August 2026. This is the fifth extension since the procedure took effect on 1 January 2024, and the longest, sixteen months.
What documentation is required?
The source of the funds used to buy the virtual currency; the path of the virtual currency, meaning the movements in the coins or in the wallet address throughout the holding period; and confirmation from the financial service provider through which the sale was made, of the deposit of the proceeds.
Does the assessment agreement protect against criminal proceedings?
No. The Tax Authority notice of 31 December 2023 stated that the assessment agreement would make clear that signing it has no effect on criminal proceedings under the Income Tax Ordinance or under any other law.
Can tax paid under the procedure be refunded?
No. Tax paid under the procedure is not refunded even where the taxpayer is entitled to refunds, losses, deductions or credits that were not reflected in the assessment agreement or the self assessment.
Does the procedure resolve the deposit of the remaining proceeds?
No. It covers the tax money only. The deposit of the balance of the proceeds remains between the customer and the bank, under Proper Conduct of Banking Business Directive 411.
Further reading
Sources
Temporary procedure for receiving tax payments on gains from the realisation of decentralised means of payment, 31 December 2023 · Income Tax Execution Instruction 06/2024, 3 April 2024 · form 909 · Israel Tax Authority notice extending the procedure, 31 August 2026 · Proper Conduct of Banking Business Directive 411 · CC 51757-08-18 (Tel Aviv Jaffa District Court, 22 February 2021) · CA 2963/21 (Supreme Court, 22 January 2023) · HCJ 8486/22 (Supreme Court, 28 June 2023)
A general overview only, and not legal advice. The arrangements described here are temporary provisions, limited in time and open to change. Updated 14 September 2026.