You're an Israeli With a Bank Account Abroad? You Better Know About CRS

If you’re not an American in Israel covered by FATCA, the Common Reporting Standard system is what will enforce tax law and prevent you from hiding assets abroad

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FILE PHOTO: The Bank Leumi Le-Israel Ltd. logo sits on the front of the company's headquarters in Tel Aviv, Israel, on Tuesday, Nov. 9, 2010.
File photo: The Bank Leumi Le-Israel Ltd. logo sits on the front of the company's headquarters in Tel Aviv, Israel, on Tuesday, Nov. 9, 2010.Credit: Bloomberg

Israelis with bank accounts in many foreign countries may find that the Israel Tax Authority has information on their accounts as of July, now that the country has approved regulations to join the international CRS reporting system.

The regulations were officially published a week ago.

What is CRS?

CRS stands for Common Reporting Standard and was developed by the OECD. It institutionalizes automatic data transfers for enforcing tax law and preventing people from hiding assets abroad. More than 100 countries participate in the data sharing, now including Israel.

Whom does this affect?

CRS affects people who are residents of foreign countries but have bank accounts in Israel, or who are Israeli residents who have bank accounts abroad.

For instance, if someone who is a resident of France for tax purposes has a bank account in Israel, Israel will now report that information to France automatically, without the French authorities needing to send a special request. It’s enough for a foreign resident to be an authorized signatory to an account for that account to be considered foreign-owned.

Is this already happening with the United States?

The new standard is similar but not identical to FATCA, the model the United States has been implementing for years with countries including Israel. Starting in September 2017, Israel received information from the U.S. tax authorities on tens of thousands of bank accounts held by Israeli residents in the United States, and transferred to the United States information on U.S. residents in Israel. The authorities expect that CRS will provide information on a larger number of bank accounts, possibly hundreds of thousands.

Which countries are covered?

The list can be found on the Israel Tax Authority website and includes the OECD minus the United States, and even places that have been considered tax havens such as Switzerland, Lichtenstein and the Isle of Man. More than 100 countries are part of CRS, but each has committed to transferring data at a different date. Israelis with a tax connection to the United States but no other country aren’t likely to feel an impact from CRS as they’re already covered by FATCA.

I have a foreign passport but I’ve never lived outside Israel and don’t have any foreign assets. Does this affect me?

The question isn’t citizenship but residency for tax purposes. If the bank managing your account has any reason to suspect you’re a foreign resident, you’ll have to convince it otherwise. FATCA is different in that the United States applies certain rules to American citizens or green card holders even if they’re not U.S. residents.

What years does this cover?

The Israel Tax Authority will be sending out and receiving data on accounts in 53 countries for 2017. These countries include France, Germany and Britain. Data for 2018 will cover 70 countries including Switzerland and Panama. Other countries may join in the future. Israel is not expected to exchange any data with Arab countries.

What information will be exchanged?

The information will include the account holder’s name, address, birth location and date, ID number, bank account number, end-of-year balance and capital gains such as interest, dividends and asset sales.

When will it happen?

Israel’s banks have until June 23 to give the tax authority information on account holders as of December 31, 2017. The information will be passed on to the relevant countries in July. Reports concerning 2018 will be exchanged in September.

If I have a foreign bank account, what do I need to do to obey the law?

Closing the bank account at this point won’t help because the reporting relates to 2017 and 2018. If you’ve reported the account and any income, you shouldn’t have any reason to worry. If not, you may be able to file under a voluntary disclosure program through the end of this year.

I’m a foreign resident but my bank doesn’t know it. Is it going to investigate me?

CRS states what banks need to do to identify foreign residents. The most stringent checks will relate to accounts containing $1 million or more.

Will I be warned before the bank passes on my data?

Every financial institution must inform its customers before passing on their data to the tax authority. The notice will be sent by mail or e-mail as of February 15 that year (or April 15 for accounts opened through insurance agents).

My account has 200 shekels, just $55, in it. Does that count?

Yes. Unlike FATCA, CRS has no minimum size requirement.

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