Voluntary Disclosure Procedure: Temporary Order

Anonymous|IsraelTax Authority|Criminal

7 September 2014

The Israeli Tax Authority published recently an official translation from Hebrew to English of the temporary order with respect to the New Israeli Voluntary Disclosure Procedure. The following includes the most important parts of the temporary order.

For the old Voluntary Disclosure Program, see: Israel's voluntary disclosure of offshore income

1. Anonymous application

a. Following requests to the Israeli Tax Authority and based on the ITA's experience in the implementation of the 2011 temporary order with respect to disclosure of Israeli residents' capital and income abroad, it has been decided to enable the submission of anonymous applications based on the following temporary order, for an additional trial period of one year from the day of the publication of this order.

b. The anonymous application shall be submitted exclusively to the Senior Deputy Director General (Investigations and Intelligence) of the Israeli Tax Authority, and he and only he will be authorized to approve the application (hereinafter: "The Authorized Official").

c. The application will include all of the relevant information, including inter alia: (i) the relevant tax years; (ii) the source of the income; (iii) the origin of the capital; (iv) the amounts of income that were undeclared; and (v) details and estimations of the tax liability. All relevant documents will be submitted together with the application. In addition, Appendix A of this temporary order will be submitted together with the application, signed by the applicant's authorized representative.

d. The Authorized Officer will transfer the anonymous application to the relevant civil officer (e.g., the tax Assessing Officer, the VAT Officer, the Real Estate Tax Officer, the Customs Collector, etc.) for the determination of the applicable tax.

e. Within 90 days from the date that the application was received by the civil officer, the applicant will submit Appendix B of this temporary order to the Authorized Officer, in which the name of the applicant will be disclosed, in order to proceed with the examination and treatment of the application.

f. If the civil officer finds that the time for handling the application should be extended beyond the above mentioned 90 day period, then he shall send a notice to the applicant with a copy to the Authorized Officer, provided that such extension shall not exceed an additional period of 90 days.

g. If the criteria for the short route, as detailed in section 3 below, are met in the anonymous application, then the civil officer may proceed with the treatment of the application under the short route.

h. If the name of the applicant was not provided within the due time, as stated above, the application shall be rejected.

i. All of the permanent voluntary disclosure procedure rules (published September 7th,2014 ) will apply, Mutatis mutandis, to applications made on an anonymous basis.

2. Offset of losses

It is hereby clarified that it will be possible, under this temporary order, to offset losses, which arise from the voluntary disclosure, exclusively against income or capital gains, as the case may be, which are reported in the voluntary disclosure,

and exclusively in the years to which the voluntary disclosure applies. The offset will be made according to sections 28, 29 and 92 of the Income Tax Ordinance [New Version] 1961, as the case may be. Losses which were not offset in the tax years that were reported under the voluntary disclosure will not be offset in the following years.

In addition, losses which were reported in tax returns which were submitted prior to the submission of the voluntary disclosure will not be offset against gains or incomes which are disclosed under the voluntary disclosure.

3. Short route" for treatment of Voluntary Disclosure applications

When the total capital included in the voluntary disclosure application does not exceed the sum of 2,000,000 NIS and the taxable income that derives from such capital does not exceed 500,000 NIS in the relevant tax years, then the voluntary disclosure application can be submitted by way of a short route, as follow:

a. The application shall be submitted to the Authorized Officer, together with amended annual tax reports or other relevant reports, amended for the disclosure period, as detailed in Appendix C of this temporary order.

b. If the Authorized Officer decides that the application meets the criteria for voluntary disclosure, then he will accept the application and will transfer it to the relevant civil officer for proceeding with the treatment. The civil officer will receive the application's details, record the data, and will issue a payment voucher to the applicant, for the applicable tax according to the request.

c. If the applicant has paid the applicable tax within 15 days from the day in which the payment voucher was provided to him by the civil officer, then no criminal proceedings will be taken against the applicant with respect to the information disclosed in the application and the tax paid due to it.

d. The applications submitted through this route will not be submitted on an anonymous basis.

e. All of the permanent voluntary disclosure procedure rules (published September 7th 2014) will also apply, Mutatis mutandis, on applications through the short route. The applications to the voluntary disclosure procedure will be submitted to Authorized Official.

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