The End of Sanction-Free Voluntary Disclosure
The sanction-free voluntary disclosure procedure will come to a close at the end of 2019. Provided the Israel Tax Authority (ITA) and the State Attorney’s Office decide not to extend this procedure, this may be the last opportunity to declare and report true income, and accordingly pay true taxes, without the discloser being subject to criminal sanctions.
As we posted in December 2017, the ITA published a new procedure for voluntary disclosure that encourages taxpayers to report true information on their revenues and assets for tax purposes.
In the course of the voluntary disclosure procedure, and in coordination with the State Attorney’s Office, the authorities committed to not initiating criminal proceedings against those who voluntarily disclose in compliance with the conditions detailed in the procedure.
According to the procedure, a taxpayer is able to disclose his or her assets, declare unreported income, and pay the taxes deriving from those, without being subject to criminal sanctions, as long as the conditions of the procedure have been met. These conditions include, inter alia, that the disclosure be sincere, complete, and performed in good faith, as well as that at the time of approaching the ITA, the taxpayer is not the subject of an audit and/or investigation.
In this context, it should be noted that this year the Income Tax Regulations (Implementation of the Common Standard on Reporting and Due Diligence for Financial Account Information) 5779-2019 were passed. These regulations assimilated the international obligations for automatic exchange of information the State of Israel has undertaken along with other countries into Israeli law. As part of the Common Reporting Standard (CRS) agreement, tax authorities in many countries have begun to transfer information to the State of Israel regarding both reported and unreported bank accounts of Israeli citizens. Therefore, the State has received and is expected to continue to receive information about its citizens who hold unreported bank accounts outside of Israel, possibly exposing those account holders to criminal proceedings.