From our Israeli colleagues at Angel and Angel
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12-December-2017
Dear Colleagues and Clients,
On December 12, 2017, the Israeli Tax Authority published a temporary order concerning requests for voluntary disclosure and is effective until December 31, 2019. These exclude anonymous track requests, which will remain in effect until December 31, 2018.
General background
From 2003 onward, Israeli residents have been obligated to report all income and assets in Israel and abroad under the personal tax obligation. These include bank accounts, financial inheritance, real estate, etc.
The obligation to report applies to all Israeli residents, including individuals who have never filed an annual report in Israel. Failure to adhere to this obligation is a criminal tax offense punishable by incarceration, tax payment, interest fines, and/or forfeiture of assets.
Benefits of the Voluntary Disclosure Procedure
The Tax Authority wants taxpayers, licensed dealers, individuals and attorneys who have failed to comply with the requirement to report worldwide income to amend their tax reports and settle the resulting tax obligations. The Tax Authority (in collaboration with the State Attorney) is therefore willing to forego legal proceedings in exchange for voluntarily compliance.
Worldwide Information Exchange
Bilateral information exchange has been on the rise in recent years, and will continue to expand in the future.
Israel has signed information sharing agreements with numerous countries, and adheres to the OECD’s international common reporting standard, designed to collect information on financial accounts, to be exchanged between tax authorities worldwide for the purpose of tax enforcement. These financial data regarding individuals are collected by financial institutions and automatically submitted to the account owner’s country of residence on an annual basis.
In other words, foreign banks that are managing accounts for Israeli residents are sharing information to the State of Israel regarding these accounts. This sharing of data will continue in the future. Needless to say, the Israel Tax Authority will verify the bank data against the tax filings on data and take the appropriate action where discrepancies are found. At this point, the authorities will not offer any leniency.
The voluntary disclosure procedure is the final opportunity to escape criminal charges.
Voluntary Disclosure Procedure Tracks
Criteria for voluntary disclosure include options for either open or anonymous submissions. Also included is an abbreviated short track for unreported capital not exceeding NIS 2 million, and the resulting taxable income does not exceed NIS 500,000.
Individuals may disclose their assets and pay tax on unreported income contingent on compliance with the limitations published by the Tax Authority. The taxpayer must establish that his non-compliance was non-willful and in good faith and must not be under a current examination or investigation by the Tax Authority. Other conditions are specified in the procedure.
The Angel Group Firm was established 35 years ago. Our firm has offices in Tel Aviv, Jerusalem and Nazareth.
We are members of the International ANTEA Firm of Accountants and Tax Experts with international offices in more than 50 countries.
Our many years of experience permit us to offer professional counseling across the country to clients facing worldwide Voluntary Disclosure issues.
Frequently asked questions
Q: Why was the voluntary disclosure procedure initiated?
A: The Tax Authority wishes to motivate taxpayers, licensed dealers, individuals and attorneys in corporations who have committed offenses under Israeli tax law to amend their tax reports.
Q: I am a salaried worker who has never submitted a financial report, and I have money in a foreign bank. Is this a problem?
A: Yes. All individuals in the State of Israel, even a salaried worker who has never filed a report, must submit a report and pay tax on foreign assets and income.
Q: I have money abroad that I received as an inheritance. Is this a problem?
A: Yes. A resident of Israel must report bank accounts, funds and assets abroad. In addition to the report, payment of tax in Israel is mandatory, for instance in cases of interest, dividends and the like accumulated on foreign accounts.
In addition, you must disclose the source of the funds, and prove that they were indeed received as inheritance. Unless proven as inheritance, the earnings will be considered by the Tax Authority as such that was acquired through capital earnings or income from work abroad, and therefore subject to significant taxation rates.
Q: What is the advantage of the voluntary disclosure procedure?
A: Failure to report is a criminal offense punishable by incarceration.
The Tax Authority, in collaboration with the State Attorney, is willing to forego criminal proceedings against anyone who performs a voluntary disclosure procedure, and report their assets and income, subject to the terms published.
Q: I have money in bank accounts in Germany, France, Denmark and India. Do I have to report the accounts in all of these countries?
A: Yes. The duty to report and pay tax in Israel applies to Israeli residents with funds and properties worldwide.
Q: I read that immunity from criminal proceedings is applicable after 7 years. Does this apply to voluntary disclosure?
A: No. Anyone committing a tax offense and withholding information is not entitled to immunity from criminal proceedings.
For additional details, please contact (discretion assured):
Yaniv Angel: yaniv@angels4u.co.il / Cellphone: 052-3819954
Tel Aviv Office:
26 Hamasger St., Tel-Aviv 6777679
Tel.: +972 – 3 – 5614126 Fax.:+972 – 3 – 6241960
e-mail: tel-aviv.office@angels4u.co.il http://www.angels4u.co.il/
Jerusalem Office:
15 Kanfey Nesharim St., Jerusalem 9546427
Tel.: +972 – 2 – 6535390 Fax: +972 – 2 – 6524494 e-mail: jerusalem.office@angels4u.co.il