Piyush Gupta

Date:- To, Erez Eyal Eng Dear Sir, As per the offer letter dated 26th May, 2021, we have prepared the profit & loss of your trading in Cryptocurrency for year 2013 along with Form 1099 reporting. This report has been prepared based on the analysis of data provided by you along with public data for the prices of various crypto currencies on different date. This document is intended solely for the information and use of the Mr. Erez Eyal Eng and his accountant; is not intended to be and should not be used by another other than the specified parties or as agreed upon in the offer letter. We assume no responsibility to any user of the document other than the above designated persons. Any other persons who choose to rely on our report do so entirely at their own risk. We would like to take this opportunity to thank you for the co-operation and assistance received by us in the execution of this assignment. If in case of any queries or clarifications, please do not hesitate to reach out to us at Upwork. Regards CA Piyush K Gupta 1 Contents Report Statistics ……………………………………………………………… 1 Scope & Limitations of Assignment ………………………………………… 4 Law Reference & Methodology - Taxability of Cryptocurrency transactions …………………………. 5 Tax Events for paying tax in digital currencies …………………….. 6 Tax Liability Calculation …………………………………………….. 6 FORM 1399 ……………………………………………………………. 7 Profit & Loss Account for the Year ended 31st December, 2018 …………. 10 FORM 1399 Reporting ………………………………………………………. 11 2 Report Statistics Particulars Client Name Address Head of Assignment Team Members Details Erez Eyal Eng Israel CA Piyush K Gupta CA Shubham Agarwal, CS Balakrishnan, Kinjal Gupta From- to- Period of report Date of Commencement of work Date of Completion of work Date of Final report 3 Kashi Scope & Limitations of Assignment Scope To prepare profit & loss account of the crypto trading from year 2013 till year 2020 along with Form 1099. Limitations of the Assignment • The prices of the Cryptocurrencies deposited or withdrawn from account is not available for the specific time on particular date. Opening and closing price on particular data is available. The average of opening and closing price of the currency for specific date is taken for seeking the value of crypto currency. • In some cases, the prices of cryptocurrency are not available in New Shekel (NIS). In that case, price of crypto currency to USD has been taken and then converted into NIS. 4 Law Reference & Methodology We have taken reference of the following sections and notifications of law for executing for this assignment: - Taxability of Cryptocurrency transactions Although virtual currencies are not recognized as actual currency by the Bank of Israel, the Israel Tax Authority (ITA) has proposed that the use of virtual currencies should be considered as a “means of virtual payment” and subject to taxation. Specifically, for the purpose of income tax and value added tax requirements, virtual currency is viewed as “an asset” and is taxed in accordance with relevant transaction classifications under the Income Tax Ordinance (New Version), 1961, and the Value Added Tax Law,-. Accordingly, unlike a regular currency, the Israel Tax Authority will regard an increase in the value of a cryptocurrency as a capital gain rather than an exchange fluctuation, making it subject to capital gains tax. Individual investors will not be liable for value-added tax, but anyone engaging in cryptocurrency mining will be classified as a “dealer” and subject to VAT, according to the circular. Anyone trading as a business will be classified as a “financial institution” for tax purposes, meaning that they will be unable to reclaim VAT on expenses but will be subject to an extra 17 percent “profit tax” applied to financial institutions. Treatment in report - “Based on discussion with Erez Eyal Eng, he is not engaged in Crypto Mining. Further, he is trading in Crypto currency in individual capacity and not in the form of corporation or sole proprietorship.” 5 Tax Events for paying tax in digital currencies: • • • • • • a crypto sale for Fiat Crypto payment for products or services crypto exchange in another crypto Crypto mining cryptocurrency payments Realising interest in cryptocurrencies for loans What does not count as a tax event? • • • • Buy crypto (fiat - SHEKEL/ USD, etc.) and maintain it. Transfer of crypto between two wallets in your possession. Transfer a crypto you own from your account to another account of yours. holding currencies such as Bitcoin in a digital wallet. Treatment in report - “Based on discussion with Erez Eyal Eng, he is engaged in Crypto Sale for Fiat and Crypto exchange in another crypto only. No payment in cryptocurrency is made for purchase of product or services.” Tax Liability Calculation • When one has the overall information about tax events throughout the tax year, it's time to find out if he/she had any losses or profits from transactions made throughout the year. For this, he/she have to go through each transaction, and determine the base rate at which it was made and which pairings should be added to it, in order to see if there is a wind or loss from the transaction, that is – whether the currency is sold at a value higher than the value at which it was purchased – and then there is a taxable profit, or not – and then there is a loss. • If one bought a large quantity of digital currencies at different times during the year and sold only a few of them during the year, at that time cost of digital currencies is calculated using FIFO or LIFO method. • FIFO means the first currency purchased is the first to be sold – and the base rate will be the rate at which the old coin hold is purchased. LIFO means that the last coin purchased is the one sold. The common and accepted methodology of the Tax Authority for determining the base rate for calculating the profit from the transaction is FIFO, so in most cases this will be the form of calculation that is recommended to use. 6 • In conversion transactions between crypto and crypto, the sales rate will be equal to the crypto exchange rate received at the time of sale. Treatment in report – “While calculation profit & loss, we have used First in first out method (FIFO) of costing which is acceptable by Israel Tax Authority.” FORM 1399 Form 1399 is also called the "Notice of Asset Sale and Tax Calculation" form. That joins the General Annual Report to the Tax Authority which is Form 1301. The taxation on activity in digital currencies is a capital gains tax, which is charged on profits generated from the activity. According to the position of the Tax Authority, digital currencies are an "asset". Accordingly, profit from activity in digital currencies is not obtained from rate changes, but rather an event that occurred during the year in the holding of the currency, first and foremost the realization of the holding: the sale or conversion of the currency. Therefore, the annual report to the Tax Authority must be attached to Form 1399, which details changes in the maintenance of digital currencies. Treatment in our report – We have provided transaction wise reporting to be made in Form 1399. For each year, 1399 reporting is attached with report. 7 Form 1399 Format 8 Transaction wise reporting in form 1399 9 Profit & Loss Account for the Year ended 31st December, 2018 Particulars Debit Amount Particulars Opening Stock of Crypto Currency: - BTC - Credit Amount Sale of Crypto Currency: - - BTC BCHABC 16,- - BCHABC - BTG 13,- - BTG - BCHSV - - BCHSV - - ETH - - ETH - - LTC 1,- - LTC - Total opening Stock 31,- Purchase of Crypto Currency: 5,- Total Sale 6,542.27 Withdrawal of Crypto Currency: - BTC 88,- - BCHABC 11,- - BTG - - ETH 1,- - LTC 3,- - BTC 1,04,- - BCHABC 20,- - BTG 12,- - BCHSV 1,- - ETH 1,- - LTC 4,- Total Purchase Deposit of Crypto Currency: - BCHSV 1,- 10 - BTC 0 Closing Stock of Crypto Currency: - Total Closing Stock 41,- Loss during the year -89,- FORM 1399 Reporting Amount to be reported in various columns of Form 1399 Particulars Total Sale Value Total Cost Inflationary Amount Nominal profit/Loss Amount 6,-,- -89,- Transaction wise Profit & Loss table to be attached with Form 1399. Transaction Numbers Inflationary Sum Cost 7 0 1 0 1 0 1 0 1 0 2 0 Total Change Base Asset 6,- 5,- 1,- Buy date Sale date BCHABC 19-Dec-17 20-Jan-18 - BTG 26-Dec-17 20-Jan-18 5,- - BTC 20-Jan-18 20-Jan-18 16,- - BTC - - 45,- - BTC - - 20,-,- 6,- BTC - - 11