Israeli Tax Authority Collects Information 

Form 5329|Intelligence Division|voluntary disclosure

Dr. Avi Nov, Adv. 

August 2014 

The Israel Tax Authority initiated recently a project that aims to collect information from individuals who usually do not have to file annual tax returns and in addition that were identified as hiding income. Various individuals are asked to file Form 5329, as explained below. Failure to answer the form properly constitutes a criminal offence. 

See also:

Israeli Tax Authority Hunts Undeclared Income

Israel will Receive Information from Tax Havens
 

The Intelligence Division

The Intelligence Division of the Israel Tax Authority has sent more than 100,000 information requests to individuals in connection with their assets and income located in Israel or abroad. The specific information is to be supplied by, which is usually the form used to open a tax file.

Form 5329

The Intelligence Division of the Israel Tax Authority looks at various indicators that can identify people that may hide income. It appears that Form 5329 was sent, among others, to people who own a number of apartments, people who have purchased expensive houses or cars and people who travel abroad regularly. 

People that receive Form 5329 are asked declare their assets and income and also sign that "Being aware that I will be subject to punishment if I give a false declaration, I declare that to the best of my knowledge the above details are complete and true". 

Foreign Residents, New Immigrants and Returning Residents
The surprising matter is that Form 5329 was sent by the Intelligence Division also to foreign residents exempt from tax on their non-Israeli source income, new immigrants and returning residents who enjoy a ten year exemption from tax and reporting on non-Israeli source income.

Voluntary Disclosure

In the case an individual submits Form 5329; does this action have an impact on his option to get into the Voluntary Disclosure program in Israel? It is well established that the voluntary disclosure program is only available to people who are not already under audit or investigation by the Israel Tax Authority.  

According to senior officials of the Israel Tax Authority, a receipt of a Form 5329 itself does not prevent an individual's eligibility for the Voluntary Disclosure program. This means that the receipt of Form 5329 in principal should not be considered by the Israel Tax Authority as a beginning of an investigation against the individual. 

Nevertheless, the receipt of the receipt of Form 5329 could be as a result of information held by the Israel Tax Authority regarding assets that generated unreported income. In such a case, it is likely that the relevant individual will not be entitled to join the voluntary disclosure program. 

In these circumstances, the Israel Tax Authority will not necessarily initiate criminal proceedings against the individual who seek to arrange his affairs and pay the applicable tax liability, even if this individual is not in principle entitled to submit an application under the voluntary disclosure program.

Dr. Avi Nov Law Offices, Israeli & international tax law 
*This article is intended for informative purposes only and is in no way to be construed as tax advice or a legal opinion

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