Israel is gearing up for January 1, when the state will become party to an international tax convention designed to combat tax evasion beyond the country’s borders. Formally known as the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, the convention will enable Israeli tax authorities to exchange information with counterparts abroad on business transactions carried out by Israelis abroad and by foreign citizens in Israel.
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Israel is limiting its participation in the international agreement to the collection of direct taxes, meaning income tax, corporate tax and real-estate tax. It will not apply, for example, to payments to the National Insurance Institute, and Israel has opted out of provisions dealing with assisting on tax audits abroad, assisting in tax collection abroad and the transfer of documents, according to the Finance Ministry’s State Revenue Administration.
Israel formally signed the pact, which was developed by the Organization for Economic Cooperation and Development and the Council of Europe, in November of last year. It has been signed on to at this point by more than 100 countries, including all of the members of the OECD, the grouping of the world’s developed economies, which includes Israel. The convention contains a confidentiality provision that limits countries sharing information to use them solely for tax enforcement purposes.