Dr. Avi Nov, Adv.
The Israel Tax Authority initiated a temporary voluntary disclosure procedure. The new voluntary disclosure procedure represents an improvement from the older procedure dating April 10, 2005.
Israeli residents can report previously undisclosed income on foreign assets, and pay their taxes. Reporting income via the new voluntary disclosure procedure will confer immunity from criminal proceedings and some relief from fines, interest and most likely indexation.
See also: The Israeli New Voluntary Disclosure Program
The Israeli Tax Authority initiative
The Israel Tax Authority endeavors to uncover unreported money held abroad by Israelis. This is done in various ways including seeking information via Israel tax treaties. The following is a summary of the Israel Tax Authority`s temporary voluntary disclosure procedure.
The Israel Tax Authority provides examples of cases where the new voluntary disclosure will apply:
(1) Unreported income from foreign assets received by way of inheritance or gift from a foreign resident;
(2) Unreported income from foreign assets acquired with money derived from income generated in Israel or abroad on which tax was paid or no tax was due in Israel;
(3) Unreported income from foreign assets on which the liability to tax arose since the 2003 tax year, following the Israeli tax reform of 2003.
The voluntary disclosure procedure will not apply to: (1) assets and income derived from a crime under the Penal Law. i.e. Section 24 - an offense carrying a punishment of more than three years; (2) applications made following or in parallel to an investigation or examination by a state authority.
Applications to the new voluntary disclosure procedure will be reviewed by a panel led by the Israel Tax Authority legal adviser, together with the Israel Tax Authority deputy director for investigations and intelligence, the deputy director for professional matters and the deputy general for audit.
The applications to the new voluntary disclosure procedure must include the relevant facts and be filed at the office of the Israel Tax Authority director. The applications will go through a preliminary review to see if they meet the above criteria and may possibly be discussed by the panel.
The Israel Tax Authority panel may require the applicant for the new voluntary disclosure to provide additional materials or to invite him to a hearing before the panel. The assessing officer handling the tax file of the applicant, if any, will participate in such assessment and its results.
According to the Israel Tax Authority circular on the voluntary disclosure procedure, “No use will be made in the criminal and civil arena with the information included in the application.”