U.S. to Get Access to Americans' Bank Accounts in Israel

Israeli financial institutions are now required to report information to the U.S. or face penalties.

Send in e-mailSend in e-mail
Banks would be required to spend three months trying to track down customers.
Banks would be required to spend three months trying to track down customers.Credit: Tomer Appelbaum

The United States Internal Revenue Service will now be able to access information on bank accounts held by Americans in Israel under an agreement reached between the two countries, Israel’s Finance Ministry said on Thursday.

The so-called “agreement of substance” means that Israeli authorities will provide the IRS with information as required under the U.S. Foreign Accounts Compliance Act — U.S. legislation aimed at combatting tax evasion by Americans with assets overseas. Israeli financial institutions will turn over information on accounts held by Americans to Israel’s Tax Authority, which in turn will turn the information over to the IRS once a year, the Finance Ministry said.

The Israel Tax Authority will not only report to the IRS on Americans but also on account holders who have permanent residency, or green card, status in the U.S. and businesses in which American citizens have a substantial ownership stake, the ministry said.

“Israel has been a tax haven for many years; we don’t have good reputation, up there between Switzerland and Hong Kong,” Dave Wolf, a partner at Hacohen Wolf who specializes in U.S. tax compliance, told TheMarker. “That is probably one of the reasons Israel was eager to sign — we want to be part of the big boys club, part of the OECD [Organisation for Economic Co-operation and Development].”

Israel joins a list of 28 countries that have signed tax treaties with the U.S. in connection with FACTA, including Britain, Canada, Ireland, Germany, France, the Netherlands, Switzerland and Italy. The agreement comes as Israel and other developed countries are taking more concerted action to find people using other countries as tax shelters.

“The agreement in substance provides Israel the status of a country with a signed agreement with the United States, “ said Frida Israeli of the Israel Tax Authority, who headed the negotiating team on the accord.

For now, the agreement calls for a one-way transfer of information. But later, the ministry said, the IRS will have to transfer information to the Israel Tax Authority about U.S. bank accounts held by Israelis. Complete details of the tax treaty will be disclosed once it is formally signed, but the agreement has been in effect since April 28.

Although the IRS will be getting the information automatically via the Israel Tax Authority, Israel’s treasury noted that Americans with accounts in Israel that meet certain threshold requirements must continue to report their bank account information directly to the IRS through the so-called FBAR form. Wolf noted that accounts of people holding a U.S. passport, even if they have never visited the U.S., are covered by the information-sharing agreement.

The Finance Ministry warned that Israeli financial institutions that refuse to cooperate will be subject to withholding of 30% of any American proceeds they would otherwise be entitled to, which could mean potentially substantial losses to institutions that fail to comply. FACTA includes provisions keeping the information that is provided secure and limiting how the IRS can use it.

Click the alert icon to follow topics:

Comments

SUBSCRIBERS JOIN THE CONVERSATION FASTER

Automatic approval of subscriber comments.
From $1 for the first month

SUBSCRIBE
Already signed up? LOG IN

ICYMI

Charles Lindbergh addressing an America First Committee rally on October 3, 1941.

Ken Burns’ Brilliant ‘The U.S. and the Holocaust’ Has Only One Problem

The projected rise in sea level on a beach in Haifa over the next 30 years.

Facing Rapid Rise in Sea Levels, Israel Could Lose Large Parts of Its Coastline by 2050

Tal Dilian.

As Israel Reins in Its Cyberarms Industry, an Ex-intel Officer Is Building a New Empire

Queen Elizabeth II, King Charles III and a British synagogue.

How the Queen’s Death Changes British Jewry’s Most Distinctive Prayer

Newly appointed Israeli ambassador to Chile, Gil Artzyeli, poses for a group picture alongside Rabbi Yonatan Szewkis, Chilean deputy Helia Molina and Gerardo Gorodischer, during a religious ceremony in a synagogue in Vina del Mar, Chile last week.

Chile Community Leaders 'Horrified' by Treatment of Israeli Envoy

Queen Elizabeth attends a ceremony at Windsor Castle, in June 2021.

Over 120 Countries, but Never Israel: Queen Elizabeth II's Unofficial Boycott