The New Voluntary Disclosure Procedure

The ITA has signed agreements on the exchange of information in tax matters with many countries in the world. According to these agreements the ITA will transfer information received from Israeli financial institutions on foreign residents holding financial assets and bank accounts in Israel, to the country they are residents in. In return the foreign tax authorities that are parties to these agreements will transfer to the ITA similar information on Israeli residents received from the financial institutions in their own countries. Immediately before these agreements come into force, the ITA published the new Voluntary Disclosure Procedure.   

The new procedure was published on December 12, 2017. The new procedure was published as a temporary provision so that requests under this procedure could be submitted until the end of 2019 or 2018 in the event that it is an anonymous request, which we will expand on below. The ITA undertakes to grant the applicants immunity from criminal charges and adopt a forgiving attitude, subject to certain conditions.

The procedure is intended mainly for Israeli residents who have generated income from assets located outside of Israel.

 

Who is entitled to apply a request for voluntary disclosure? 

The conditions set out in the procedure for submitting a request for voluntary disclosure are as follows:

  1. The disclosure shall be sincere and undertaken in good faith.
  2. No investigation in underway regarding the applicant, including his/her spouse, by the ITA or the Israeli police before the application is submitted.
  3. The ITA has no information related to the disclosure prior to the application being submitted.

The request will be submitted to the Senior Deputy Director General for Investigations and Intelligence at the ITA, as he is the only person authorized to approve it.

The disclosure shall be sincere and include all the relevant information, such as names of the applicants, tax years involved, income origins, unreported income and the estimated tax. After the disclosure has been examined and approved, the applicant will be directed to the tax assessor and pay the tax. Once the tax was paid on the date determined, no criminal procedures shall be instituted against the applicant. 

 

Voluntary Disclosure routs

  • The anonymous route

According to the new procedure, the request may be submitted anonymously by complying with the above requirements, except for revealing the applicant's name which is to be disclosed after the signing of an assessment agreement.
The submission of an anonymous request can be undertaken until December 31, 2018.

  • The abbreviated route

The abbreviated track is intended for applications in which the total capital included does not exceed NIS 2 million and the total income deriving from the capital does not exceed NIS 0.5 million.
Under this track the applicant shall pay the tax assessed within 15 days. In general, the abbreviated track will not allow the submission of anonymous requests.

Criminal immunity

The ITA grants immunity from criminal charges to applicants undertaking voluntary disclosure. According to the procedure the limits to this immunity are as follows:

  1. A voluntary disclosure request may be submitted only once for each applicant.
  2. The procedure will not apply on incomes obtained from illegal activity
  3. The immunity from criminal charges shall apply only with regard to information provided under the disclosure.
  4. The immunity from criminal charges shall apply only with regard to offenses committed under Israeli laws as detailed in the procedure: these are the Income Tax Ordinance, VAT Law, Real Estate Taxation Law and the Customs Ordinance.
  5. In the event that the request is not approved, the ITA shall not make any further use of the information provided to it under the disclosure request. 

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