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Israeli tax amnesty: extended and anonymised

24 July 2012

 

Alon Kaplan TEP and Susanna von Bassewitz explain recent changes to the Israeli voluntary disclosure programme

The Israeli Tax Authority (ITA) launched a voluntary disclosure programme in November 2011 for Israeli tax residents holding foreign assets. The deadline was recently extended from 30 June to 27 September 2012. In addition, the procedure has been amended and disclosure may now be made anonymously. The newly launched procedure grants greater facilitations than the permanent voluntary disclosure procedure available in Israel since 2005.

The Israeli tax system was changed in 2003 from territorial to global taxation. Israeli residents are taxed on their worldwide income. The voluntary disclosure programme enables unreported foreign assets to be made tax compliant and provides immunity to individuals from criminal prosecution for tax offenses. No penalties and no interest will be imposed and exemptions may be granted from linkage to the consumer price index.

To date, more than 200 applications have been filed with the ITA. Another 10,000 undeclared foreign accounts and more than USD5 billion are estimated to be held abroad by Israeli taxpayers. To encourage more applications, the ITA has extended the deadline and allows applications to be filed anonymously. The applicant must provide information on the foreign assets (i.e., amount, origin of funds, type of income and certain other documentation) to an especially appointed committee, but need not identify the applicant. If the committee decides that the application does not fall within the scope of the procedure, the received information will not be used for any civil or criminal tax offense prosecution. If the committee decides that the application meets the programme’s criteria it will provide an assessment of the expected tax liability. The applicant may then decide to accept the assessment, pay the tax owing (and by so doing reveal his identity), or to withdraw their application.

An application can be filed by Israeli taxpayers holding undeclared assets abroad. This includes any possible situation as approved by the committee. The ITA provides some examples of applicable situations. This list is not exhaustive:

1. Undeclared income of foreign assets that were received by way of inheritance or gift from a non-Israeli benefactor

2. Undeclared income of foreign assets from funds acquired in Israel or abroad for which taxes have been paid or that have been exempt from tax in Israel; and

3. Undeclared income of foreign assets that have not been taxable in Israel under the previous tax system, prior to 2003 (see above).

Note that the voluntary disclosure procedure does not apply to funds derived from criminal activity or if there is an ongoing investigation by the ITA or judicial authorities. It also does not preclude a criminal investigation being opened during the procedure.

 

Alon Kaplan TEP is the Founder and Susanna von Bassewitz is an Advocate at Alon Kaplan Law Firm, Tel Aviv

 

The content of this article does not replace legal or tax advice and may not be relied upon. Specific circumstances have to be considered and require evaluation and advice by a professional.

 


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