Israeli Taxation and Banking Secrecy

Unreported|bank accounts|Tax Authority

Dr. Avi Nov, Adv. 

August, 2013 

The Israeli Tax Authority is moving ahead with the battle against owners of unreported overseas bank accounts. In recent months, the Israel Tax Authority has been conducting a great and complex investigation into unreported overseas bank accounts held by Israelis in foreign banks, mostly in Swiss banks. The Israeli Tax Authority estimated that approximately NIS 50 billion is held in unreported overseas bank accounts by Israelis around the world.

See also:
Israeli Banks and Tax Compliance
Israeli Banks and Foreign Residents

Lists of Bank Accounts

The Israeli Tax Authority obtained various lists of undeclared foreign bank accounts held by Israeli clients. The famous list is that of the Swiss bank UBS, in which the Israeli Tax Authority has already begun investigating those suspected of failing to report their assets held at the bank.

It appears that the Israeli Tax Authority had obtained another list of Israelis with accounts at another Swiss bank (HSBC), and was taking action to identify the tax evaders on the list. According to sources in the Israeli Tax Authority, there are also two other lists that are currently under investigation.

See also: Israeli Tax Authority Hunts Undeclared Income

Exchange of information

The Israeli Tax Authority plans to continue developing channels for transferring information from other countries to Israel and vice-versa. For this purpose, the Israeli Tax Authority devotes great efforts to develop and improve its databases and cross check information using the most advanced methods. In recent years, the focus of the Israeli Tax Authority is on legislative amendments. Some major legislative changes will be completed via the 2016 Economic Arrangements Law that will allow a more effective exchange of information. In addition, the Israeli Tax Authority invests heavily in developing a system that will enable cross-reference.

See also:
Israel will automatically exchange information
Israel will Exchange Information on Bank Accounts

Cooperation with the IRS

The agreement between the Israeli Ministry of Finance and the US Department of the Treasury, signed a year ago, for the implementation of the US Foreign Account Tax Compliance Act, is aimed at improving global tax enforcement. Under the FATCA agreement, the Israel Tax Authority will report the accounts of US citizens in Israel to the US Internal Revenue Service. The FATCA agreement provides a mechanism for the transfer of information to the US tax authorities through the Israel Tax Authority, which will obtain the information from financial entities in Israel. In addition, the FATCA agreement allows the IRS to report on Israelis holding accounts in the US. It is interesting to note that the OECD has copied the US FATCA by setting a standard called CRS, to which Israel is also committed.
See also:
Israel and U.S. Sign FATCA Agreement
New Israeli Bill to implement FATCA

Form 5329

The Israel Tax Authority, sent over the past year, over 100,000 forms requiring the taxpayers who receive them to immediately report their income and wealth in Israel and overseas. In the recent months, Israelis who have not filled out form 5329 sent to them by the Intelligence Division of the Israel Tax Authority for declaring their assets are likely to be summoned for investigation. See also: Israeli Tax Authority Collects Information

Voluntary Disclosure

The Israeli voluntary disclosure procedure, which part of it is due to expire in September taxpayers report previously unreported assets to the Tax Authority with no criminal proceedings. In this voluntary disclosure procedure, 2,100 israelis have already submitted a request for voluntary disclosure so far.

See also:
The Extended Voluntary Disclosure Program
Voluntary Disclosure - Deadline delayed
Israel's new voluntary disclosure of offshore income

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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