Israel may seek special treatment on FATCA

12 April 2012

Israel's government may ask the USA for an arrangement to ease the impact of the US Foreign Account Tax Compliance Act (FATCA).

The country is estimated to be home to 100,000 American citizens, many of whom have not been to the USA for years and have little contact with it. However, under FATCA's onerous disclosure provisions, their Israeli bankers will have to establish their citizenship and report their financial affairs to the USA Internal Revenue Service.

According to the Tel Aviv newspaper Haaretz, Israeli banks are already writing to their USA-national clients to warn them of the bank's FATCA reporting obligations. One such bank - Leumi - has apparently told clients with USA citizenship that their accounts will be frozen at the beginning of May unless they confirm that the IRS knows about their bank accounts in Israel.

Another bank, Hapoalim, has also requested American customers to make the same declaration, while other banks are even asking clients to provide documentary proof of their USA tax compliance.

Although FATCA's provisions do not begin to take effect until January 2013, this frenzy of activity is understandable given the large number of people affected - a far greater proportion of the population than in any other country, perhaps excepting Canada.

The Association of Banks in Israel has already asked the Bank of Israel (the country's central bank) for guidance. Though the BoI has not yet officially responded, Haaretz says its governor, Stanley Fischer, is considering asking the cabinet to reach a tax agreement with the USA to minimise the disruption caused by FATCA. This, it says, could be similar to the deal already negotiated between the USA and the five largest European economies, under which individual foreign banks need not deal directly with the IRS but can obtain FATCA-compliant status through their own governments.

 

Sources

Haaretz

International Adviser

Haaretz (2)

 


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