The Israeli Tax Authority published on 7 September 2014, a new Voluntary Disclosure Program. This new program replaces the 2005 voluntary disclosure procedure. The purpose of the Voluntary Disclosure Program is to encourage non compliant taxpayers to come forward to the tax authority, disclosure their unreported income and pay taxes, consequently avoiding criminal prosecution.
The Israeli Tax Authority is highly recommending Israelis with undeclares income to utilize the Voluntary Disclosure Program and come forward before an investigation is initiated against taxpayers.
For the old Voluntary Disclosure Program, see: Israel's voluntary disclosure of offshore income
The Details of the Program
The new Israeli Voluntary Disclosure Program is effective from 7 September to 31 December 2016. In addition to the main program, a transitional procedure is effective for one year.
The new Israeli Voluntary Disclosure Program waives criminal proceedings to the extent that the application is made in good faith, and the tax authorities do not have information regarding the taxpayer's tax liability; and have not initiated an investigation or an audit with regard to the taxpayer's tax liability.
Where a Voluntary Disclosure Program application is rejected, the tax authority cannot use the information provided by the taxpayer both in criminal and civil.
In addition to the new program discussed above, there are two transitional provisions which have been added for a period of one year:
The Anonymous Track: this track provides the taxpayer an opportunity to come forward to the tax authority anonymously in order to check out the tax liability.
A Short Track: this track is offered for taxpayers with the total unreported capital included in their voluntary request that does not exceed NIS 2,000,000 and the unreported income derived from the unreported capital does not exceed NIS 500,000.
In conclusion, the new Voluntary Disclosure Program represents a significant step by the Israeli Tax Authority and opportunity for people who own foreign bank accounts to step forward and report their undeclared 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