The Israel Tax Authorities ("ITA") published on December 12, 2017, a new voluntary disclosure program ("New VDP"). The New VDP would enable Israeli tax residents to disclose unreported assets and income and in exchange receive immunity from criminal actions subject to the fulfillment of the required terms of the New VDP and payment of the taxes owed.
The ITA was encouraged to publish the New VDP following the unexpected success of the previous voluntary disclosure program ended in December 2016. The previous voluntary disclosure program resulted in the submission of more than 7,400 applications (approximately 60% of such were anonymous application), the disclosure of unreported assets of more than NIS 25 billion (approximate USD 7.2 billion), mostly in unreported bank accounts. This resulted in the collection of unpaid taxes in the amount of approximately NIS 3 billion (approximately USD 0.9 billion).
In addition, since the previous voluntary disclosure program, Israel signed and joined a number of multinational exchange of information agreements, among them:
- Multilateral Convention on Mutual Administrative Assistance in Tax Matters – This global convention was signed by over 90 countries and is currently accepted as the instrument for swift implementation of the new Standard for Automatic Exchange of Financial Account Information in Tax Matters developed by the OECD and G20 countries.
- Common reporting standard – Currently, such common reporting standard was approved by over 50 countries as part of the Multilateral Convention and would allow the swift exchange of information held by governmental and financial entities. The automatic exchange of information should begin in the end of 2018.
- FATCA agreement with the US that would allow the ITA to receive information with respect to Israeli tax residents that hold accounts in financial institutions in the US.
According to the ITA, the New VDP would be the last opportunity for Israeli tax residents to comply with the requirements under Israeli tax law and report their unreported assets and income before the ITA would start tax assessments according to the information that would be received from other tax authorities according to the exchange of information agreements.
The New VDP provides two further special tracks for disclosure in addition to the main disclosure track, as follows:
- Anonymous Application - the anonymous application is a first step in the voluntary disclosure process. The ITA would examine the application to determine if the application would be eligible for the terms of the New VDP. After being approved, the application would be directed to the relevant tax official to resolve the resulting tax liability and only after the tax liability was resolved their identity would be disclosed to the ITA.
- Short Track - applies where the total undisclosed capital does not exceed NIS 2 million (approximately USD 555,000) and the resulting taxable income does not exceed NIS 0.5 million (approximately USD 138,000).
The New VDP would be in effect until December 31, 2019. Nevertheless, the ability to submit an application according to the anonymous application track would be in effect only until December 31, 2018.
Grant Thornton Israel Tax department has vast experience in supporting clients in dealing with the ITA, including vast experience gained in previous voluntary disclosure programs.
Please do not hesitate to contact us for more information and to set a confidential meeting to discuss your personal situation.
For more information, please contact:
Yakov Bershtein CPA (Adv.),
Senior Tax Manager,