A new amendment to the Israeli Income Tax Ordinance of 1961 will enable the government to enter into international agreements which include information exchange agreements. An information exchange agreement will allow the Israel Tax Authority to share information with tax authorities of countries around the world and specifically with tax havens, and obtain information on foreign bank accounts held by Israelis.
Under current law, the Israel Tax Authority can only share information with foreign tax authorities through tax treaties. Israel has about 50 tax treaties, all of which include clauses for the sharing of information about money and assets. Yet, Israel has no tax treaties with other countries, including tax havens, such as BVI and Cayman Island, which do not impose taxes on foreign residents. In fact, the Israel Tax Authority cannot obtain information under current law on the money and assets of Israelis in these countries.
The new Amendment
The new law will empower the Israeli government to enter into information exchange agreements especially with tax havens. The objective of the new amendment is to combat undisclosed capital held by Israelis overseas, which is estimated at hundreds of billions of dollars, and to bring it into the Israeli tax net.
Israeli residents who have not yet disclosed their foreign income and assets to the Israel Tax Authority must do so before the new amendment to the Income Tax Ordinance is passed and comes into effect. It seems that it is the last chance to submit a request to the Israel Tax Authority for voluntary disclosure, which grants immunity from criminal prosecution with a tax settlement. When the new amendment to the Income Tax Ordinance will come into effect, the Israel Tax Authority may obtain the information and there will be no more criminal immunity.
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