Several Israeli banks started recently to require foreign holders of accounts to sign a declaration that all the money held by them had been reported to the tax authorities in their home country and that they had paid everything that was due accordingly. If someone refuses to sign the declaration, the Israeli bank may reject a request by that person to withdraw money from the account.
The new policy by the Israeli banks does not apply only to US persons, under the Foreign Account Tax Compliance Act which requires overseas banks to provide U.S. tax authorities on their American account holders, but also to people from other countries mainly from the EU.
There are no orders on this issue from the Bank of Israel, and therefore the Israeli banks are setting their own internal policies. It appears that new directives will be published soon, due to Israel's acceptance of the new international mechanism of Automatic Exchange of Information described below.
Automatic Exchange of Information
The Finance Ministry announced recently that Israel will soon join the OECD's international mechanism of Automatic Exchange of Information on financial accounts. The Automatic Exchange of Information is expected to make it more difficult to escape paying taxes on financial assets.
The recent statement by the Finance Ministry on Automatic Exchange of Information could have dramatic implications for overseas investors with undeclared assets in Israel banks. Once the new system of Automatic Exchange of Information is in place, the assets would be automatically disclosed to participating foreign tax authorities.
The Automatic Exchange of Information system would also affect Israelis with undeclared financial assets in foreign bank accounts, which the Israel Tax Authority could be informed of. The Automatic Exchange of Information mechanism was developed by the Organization for Economic Cooperation and Development (OECD). It follows the United States Foreign Account Tax Compliance Act.
It appears that the world is quickly becoming a smaller place for hiding money. The new network for international cooperation in the field of taxation and financial information exchange, will lead many people to declare their hidden assets and 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