The Israel Tax Authority is looking to go after Israelis who had foreign bank accounts but closed them several years ago – before new data-share regulations came into force.
The Common Reporting Standard, developed by the OECD, has been in effect in Israel since the beginning of the year.
This enables the automatic sharing of financial data among more than 100 countries, and institutionalizes automatic data sharing to help enforce tax law and keep people from concealing assets abroad.
Israelis who closed foreign bank accounts shortly before the CRS took effect are considered immediate suspects in the search for unreported bank accounts.
For instance, Swiss bank Julius Baer, a power in offering financial and advisory services to individuals, was recently contacted by Israel Tax Authority.
The taxman asked the bank for information on Israeli customers who shut their accounts after being asked by the bank to prove that the accounts were reported in their country of residency.
This comes a week after the Israel Tax Authority contacted its Swiss counterpart, which informed it of the notice sent out by Julius Baer. The tax authority made a similar demand of another Swiss bank.
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Thus Israelis who shut foreign bank accounts in an attempt to skirt the new automatic reporting standards may find that they’re not off the hook.
The CRS affects foreign residents (by tax standards) with bank accounts in Israel, as well as Israeli residents with bank accounts abroad.
Under the reporting system, Israel is expected to receive information on its residents’ foreign bank accounts from 2017 or 2018, depending on the country, even if the accounts have since been closed.
Israel is due to receive information on 2017 from 53 countries including France, Germany and Britain. It will receive information on 2018 from 70 countries including Switzerland and Panama.
The CRS delineates what information banks must share including the name of the account holder, his or her address, birthdate, location, ID number, account number, end-of-year balance and any financial gains.
The CRS does not include the United States but is based on a similar American system already in effect, the U.S. Foreign Account Tax Compliance Act, FATCA.
Israel is seeking information on account holders at Julius Baer from 2014 to 2017 who have an Israeli address and were asked to provide information on Israeli tax compliance and declined.
“This is an innovative step that shows the tax authority’s determination to get to all Israelis who are evading taxes via foreign bank accounts,” said accountant and lawyer Amir Cooper of the law firm Benjamin and Co.
At this stage it’s not clear if this is part of a broader campaign, but it’s likely that the tax authority will take more such steps, Cooper said.
He noted that such a dragnet could catch innocent Israelis as well, such as people who are not Israeli residents for tax purposes but who have maintained an Israeli address on their account for their own reasons.