Israel will automatically exchange information

Income Tax|Israel|exchange of information |Tax Authority

Dr. Avi Nov, Adv.
July 2015
A new legislation, amending the Israeli Income Tax Ordinance, was introduced recently which will allow Israel to join the automatic exchange of information mechanism developed by the OECD. This means that all bank accounts will be potentially accessed by the tax authorities worldwide.
See also:
Israeli Banks and Foreign Residents
Israel will Receive Information from Tax Havens 
The Current Legal Situation
Under current legislation, the Israeli government cannot sign a multilateral tax agreement, such as the OECD’s Automatic Exchange of Information initiative, and not a bilateral exchange of information agreements. The Israeli tax law allows only the signing of bilateral treaties for avoiding double taxation. This is going to change soon and will have a dramatic impact on owners of secret bank accounts.
The new legislation
The new legislation includes various provisions that will empower the Israel Tax Authority enforcement capabilities. The new legislation was necessary for the implementation of Israel's Foreign Account Tax Compliance obligations and for the implementation of the new Automatic Exchange of Information commitment, also known as the Common Reporting Standard.
See also:
Israel and U.S. Sign FATCA Agreement
New Israeli Bill to implement FATCA
Conditions for Exchanging Information
The Israel Tax Authority will be able to share information according to an information exchange agreement with any tax authority of another country (provided there is an agreement between the two countries) at the request of the latter or spontaneously, but subject to a number of conditions:
(a) The requested information must be required for enforcing the tax laws of the other country applying means not prohibited to the Israel Tax Authority.
(b) The agreement must require that the other country maintain secrecy.
(c) The information cannot be transferred in various situations: if the security of the State of Israel, or the peace or security of its people, may be affected; if an investigation is taking place; or if the other country does not give back information without reasonable cause.
Punishment and Fines
Criminal sanctions will be imposed, including a seven year jail sentence, for financial services workers preventing tax information exchange, including failure to identify the account holder at an Israeli financial institution or report account information.
Also, if an Israeli bank or any financial institution fails to carry out client identification procedures, a fine of NIS 10,000 per month may be imposed up to a maximum of NIS 600,000 per year per financial institution.
Voluntary Disclosure
The new legislation puts an end to the bank secrecy, and therefore people with undisclosed capital and income should consider initiating a voluntary disclosure procedure with the Israel Tax Authority.
See also:
Israeli New Voluntary Disclosure Program
Israeli Tax Authority Collects Information 
Israeli Tax Authority Hunts Undeclared Income
Israel will Receive Information from Tax Havens
Tax Havens are Attractive for Israelis
 
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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