Voluntary disclosure


The phenomenon of Israeli residents holding assets, bank accounts sourced in business activity, real estate or inheritance has become increasingly prevalent all over the world in recent years. The income derived from these sources not declared to Israeli relevant authorities thus causing Israeli resident, in some cases, to be seen as tax offender.  An international trend of transparency between tax authorities and banks regarding black capital exposure and overseas revenues declaration accelerate recently around the world. This motivated not only by tendency to enlarge governments’ budgets as one-time opportunity but to derive income for the next years. A primary focus of Israel Tax Authority in recent years is to bring money back to Israel. Tax Chief Mr. Moshe Asher believes that there are billions of dollars of unreported capital abroad held by Israeli residents and Jewish residents of foreign countries. Under Israeli Tax Law, not only residents must pay income tax on their global income but even foreigners who hold their bank accounts or assets in Israel and enjoy revenues derived from business activity in Israel have to declare and pay taxes to Israel Tax Authority.  2003-2014 Israel Tax Authority has a long story of attempts of bringing money back to Israel but recently it seems that its enforcement becomes tougher and its ties with foreign tax authorities and banks overseas strengthens. Till September 2014 there was no legal arrangement for voluntary disclosures and Israel Tax Authority could sue for criminal prosecution both individuals and companies. Much earlier, before 2003 Israeli residents were taxable only on income derived from sources in Israel.  Since 2003, actually, they are taxable on income from sources out of Israel as well. Thus many of Israeli residents and companies became tax offenders unknowingly. Consequently, many of them hesitated to take a step toward arrangements of their debt to Israel Tax Authority and continued to collect interests and penalties. New Voluntary Disclosure,  September 2014

The new long-awaited voluntary disclosure program was launched in September 2014 and enables to apply anonymously or non-anonymously, depending on capital to reveal, to authorities and to get immunity from criminal prosecution. The immunity provision depends on the taxpayer meeting a number of criteria, full cooperation with Authorities and precedence to tax authorities, government or other entities for opening investigation procedure. During the next two years an Israeli resident can apply in one of two routes in order to get a fast arrangement with Israel Tax Authority – the anonymous route and the green route. Anonymous Route enables to get an arrangement in 90 days only with no disclosure of individual’s personal details, but to expose his overseas assets and incomes. At this case it is necessary to be assisted by a tax expert and/or representative. At the Green Route the local Assessor will not investigate the amounts of tax to be paid. Only if unreported income is less than 500,000 NIS and the unreported assets are valued at less than 2 million NIS, it is possible to apply by the Green Route. Although some benefits regarding fines, penalties and interests which were granted in the past are no longer effect, there is still no doubt that it is better to apply voluntarily then wait till Israel Tax Authority delegates will “knock on the door”. Tax Chief claims that even these days Israel Tax Authority does not wait till December 2016, when the new voluntary disclosure era comes to the end, but operates at all times to discover concealed information.  In conclusion, in order to avoid unpleasant situation, it is recommended to step wisely, precede authorities and not to wait to their surprising visit at your offices or home. We believe that using professional services of Israeli tax experts enables to begin and accomplish a voluntary disclosure mission of Israeli residents abroad with no unnecessary economic damage. You are welcome to apply to Angel & Angel in order to get a professional tax solution to your customers and began a voluntary disclosure procedure.