Voluntary Disclosure – update
Last night, the accountant world of Israel got together to review the Voluntary Disclosure procedure after the first eight months of the new system being in place.
- The tax authority are interested in people sorting out tax crimes (of all natures) going back 10 year (i.e. no further back than 2005). For prior periods, the tax authority needs to be satisfied that the source of funds is clean, and the burden of proof is on the taxpayer in question to prove that the funds were not from monies that should have had Israeli tax paid on them. If proof cannot be forthcoming, expect an “imputed tax” to be levied.
- The “short” route qualifications are treated fairly leniently, i.e. they want more people in this route. This should allow for quicker audits by the tax inspectors – although whether this happens in practice remains to be seen.
- The “anonymous” route is designed to give the taxpayer piece of mind regarding the tax due before disclosing their name. The representative said that he has not heard of a single case where the amount has been reneged on once the name has been disclosed.
- The approval stage (checking that the taxpayer has no started investigation) is taking much longer than expected. The authorities are trying to improve this aspect; but it is not entirely in their hands.
- In and of itself, the receipt of the form sent out by the tax authority requesting information (see more here) does not necessarily imply prior information; much depends on why the person received the form and whether it has anything to do with the unreported income.
- To date, approximately 1,600 requests have been made.
- The tax authority representative said that tax paid incorrectly to a foreign country (e.g. due to Double Tax Treaty provisions) that cannot be recovered “will be taken into account”. He declined to elaborate further as to how that would be done.
- Paying the tax – and thereby sorting out the civil side of the issue – puts you in s much better place in terms of potential criminal proceedings. And so, even for those who don’t want to go into the full disclosure scheme should report their income and pay the tax due, even if they don’t get the “get out of jail” card.