Recently, foreign residents with accounts in Israel have been receiving letters from Israeli banks stating that they bank would transfer information about their accounts to their state of residency through the Israel Tax Authority (ITA) as part of the CRS information exchange agreements that Israel signed on.
The Common Reporting Standard, otherwise known as the CRS, is the global standard for automatic exchange of financial information as developed and initiated by the OECD.
If the client claims he is not a resident of the country the bank has evidence of, the client may file an objection, include documentation attesting that the client is not a resident of that relevant country, but rather a resident of Israel, and this will be examined by the bank.
In the event that proof is not sufficient or not provided and the client’s country of residence is a member state of the OECD, the details of the account holder will be transferred to the ITA and from there to the relevant tax authorities of that country.
Last month, the ITA published a list of countries with which Israel will transfer information to, and in return will receive information on bank accounts of Israeli residents in financial institutions in their territory, as part of the multilateral agreement. Among the prominent countries that will exchange information with Israel are: Switzerland, Hong Kong, the Bahamas, Andorra, Jersey, Macau, the Cayman Islands and the Virgin Islands, and of course large economies such as Germany and France.
According to this document published by the ITA, Israel is expected to exchange, as well as receive information on bank accounts for 2017 and 2018 as early as September 2019.
Consequently, if you received such a letter or have undisclosed accounts in or outside Israel, we recommend that you consult with legal counsel as soon as possible in order to avoid penalties.
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.