In light of the expected implementation of the CRS agreement in Israel for automatic exchange of information between tax authorities, and as part of the increasing efforts of the Israeli Tax Authorities (“ITA”) to detect tax evaders and to expose unreported worldwide income of Israeli tax residents together with the success of the last voluntary disclosure procedure that expired at the end of 2016, the ITA published a new "voluntary disclosure procedure" today.
The objective of this procedure is to encourage non-compliant tax payers to come forward, disclosure their unreported income and pay taxes, thus avoiding criminal prosecution.
According to the procedure, the taxpayer can disclose the unreported income, and pay the tax due, if all conditions of the program are met, which includes a voluntary disclosure made in good faith and that the disclosure has begun before the ITA has started to investigate the applicant.
Taxpayers who are accepted into the procedure will still have to pay all taxes due (including interest, linkage and possible civil fines as determined by the agent), and in return the ITA, with the approval of the Criminal State Attorney, will not recommend criminal prosecution against these taxpayers. Consequently, the ITA is highly recommending utilizing this “window of opportunity” to come forward before an investigation is initiated against taxpayers.
The new procedure will be in effect until the end of 2019. Similar to the previous procedure, it also includes shortened and anonymous tracks. It should be noted that the anonymous track will be available until December 31, 2018.
An Anonymous Track- this track enables the taxpayer to come forward anonymously in order to check out the tax liability and upon which the taxpayer has a limited time frame to expose his name and his full details in order to participate in the program.
A Fast Track-when the total unreported capital included in the voluntary request does not exceed NIS 2,000,000 and the unreported income derived from it does not exceed NIS 500,000, the taxpayer can submit his request using this “Fast Track” together with his amended returns. If the request is approved, the taxpayer will receive a payment voucher. Once this voucher is fully paid by the time limit indicated on it, the taxpayer will receive notification stating that no criminal investigation will be opened regarding the information he had disclosed.
The content of this article is intended to provide a general guide to the subject matter and is not a substitute for legal consultation. Specific legal advice should be sought in accordance with the particular circumstances.