Israel has again joined the ranks of jurisdictions to encourage taxpayers to come forward with any undeclared financial assets with a promise of lenient treatment, ahead of the soon-to-take-effect Common Reporting Standard.
Under the Israel Tax Authority’s latest voluntary disclosure procedure, Israelis will be able to come clean about any previously unreported income without facing criminal proceedings, Israeli tax specialists and media organisations are reporting. The new scheme was unveiled on 12 December, and is in force now.
The Common Reporting Standard is the OECD’s global response to the US information reporting programme known as FATCA (Foreign Account Tax Compliance Act), and currently has more than 100 countries committed to automatically exchanging information, beginning this year for some, next year for others.
Other jurisdictions that have also introduced tax amnesties ahead of the CRS have included Indonesia, Argentina, Brazil, Ireland, Jersey and Mexico.
Israel’s new voluntary disclosure procedure, or VDP, is being launched almost a year after a previous, successful VDP ended in December 2016, according to Globes, an Israeli business news provider, and followed “months of discussions between the [Israeli] Tax Authority and the Ministries of Finance and Justice”.
The goal of the new VDP, the Globes report noted, is to “enable more Israelis who have not reported all their income and capital to voluntarily disclose them and pay the legal taxes on it in order to prevent criminal proceedings”, and will be in effect until the end of 2019.
“Like the previous procedure, it also includes abbreviated and anonymous tracks”, with the anonymous track in effect only until 31 December 2018. In order to make a VDP under the abbreviated arrangement, individuals must not have more than 2m Israeli shekels (US$570,000) in unreported capital, and the taxable income resulting from it must not exceed 500,000 Israeli shekels, the Globes report said.
Under Israel’s previous voluntary disclosure procedure, some 30bn Israeli shekels was reported in around 7,500 voluntary disclosure requests, and around 3bn Israeli shekels was collected.
Israeli is one of 53 countries that have committed to begin automatically exchanging information under CRS in 2018. Another 49 have agreed to begin the automatic information exchange this year. Among the countries that have not signed up to the CRS is the United States, which says it doesn’t need to because it has its own information exchange programme, FATCA.
To read more about the new voluntary disclosure procedure on the website of Herzog Fox & Neeman, an Israeli law firm specialising in tax matters, click here.