The Office of Economic Co-Operation and Development (OECD) has long sought to open banking records in countries with banking secrecy laws through its common reporting standard in order to promote policies to improve the economic and social well-being of people around the world. In recent years, Switzerland, infamous for its secrecy laws, was forced under political and economic pressure to comply with its reporting requirements. Israel, once a bastion for offshore accounts by foreigners, looks to be the next to join a long list of countries forced into compliance with the OECD’s common reporting standard with an OECD imposed deadline of December 31, 2017.
Those with assets in Israel take heed; soon Israeli banks will begin to disclose the names of foreign account holders of Israeli bank accounts to each owner’s respective tax authority. It is not yet known how soon we can expect disclosures to begin. Despite the common reporting standards set to become effective January 1, 2018, it is unlikely that disclosures will begin that early. The Israeli finance committee has yet to announce a comprehensive plan for disclosures. This will be no easy task as Israeli banks will assuredly be overwhelmed by the multitude of foreign account holders they will have to notify in order to begin compliance reporting. One should expect the process to take months at least. Israeli banks will have to verify their clients’ tax compliance in each client’s country of residence. This includes obtaining from their clients’ tax reports in order to know whether or not the banks will need to disclose the accounts to their client’s respective government(s).
It is likely that these new bank regulations adopted by the Israeli government will resemble the ones adopted by US banks, namely rules to implement FATCA (“Foreign Accounts Tax Compliance Act”) which force all financial institutions to report any American citizen’s bank account. Before the Israeli banks can comply and implement a common reporting standard process, the Israeli legislative body, the Knesset, must adopt this legislation and the Israeli government must integrate the common reporting standard process within its own regulations.
Canadian and American citizens who retain bank accounts or transact with banks in Israel who have not previously reported these accounts should consider their options in light of impending disclose. Voluntary self-disclosures may be appropriate for many in order to avoid and/or lessen stiff tax penalties that will surely follow.
The comments offered in this article are meant to be general in nature and are not intended to provide legal advice regarding any individual situation. Before taking any action involving your individual situation, you should seek legal advice to ensure it is appropriate for your circumstances.