In the classical rock song “Age of Aquarius” we are promised: “Harmony and understanding, Sympathy and trust abounding….”
Recently the Israel Tax Authority circulated a draft bill regarding the application in Israel of FATCA, the Foreign Account Tax Compliance Act of the United States.
Pursuant to Israeli cabinet resolution No. 1490 of March 21, the government is in the final stages before signing an agreement between the government of the United States and the government of Israel to improve tax compliance and implement FATCA.
According to Annex 1 of this agreement, each financial institution in Israel would be obliged to inquire about the identity of the holder of rights to accounts deposited with it, to ascertain whether the holder is a US person as defined in the agreement (including US resident or citizen and a corporation or partnership formed in the US).
In the case of a US person, the financial institution will be required (after informing the holder and giving the holder an opportunity to deny being a US person) to notify the Israel Tax Authority of the existence of the account for forwarding to the US Internal Revenue Service.
For these purposes, financial institutions would include custodial deposit institutions, investment dealers and certain insurance companies. A holder would include any beneficiary as defined in the Anti-Money-Laundering Law, 2000.
It appears that once the bill is enacted by the Knesset, regulations will be issued setting out the procedure for transferring the information to the Israel Tax Authority.
The OECD has also issued a declaration on automatic exchange of information, whereby OECD member countries take upon themselves to apply in a uniform way automatic information exchange to implement the Multilateral Convention on Mutual Administrative Assistance in Tax Matters.
Every OECD country except Israel has apparently signed the multilateral convention. Israel is expected to do so shortly after passing the relevant enabling legislation.
For these purposes, financial institutions in Israel will again need to ascertain and report details of their account holders – all of them, not just US persons.
So there will be an overlap between the OECD requirements and the US FAT CA requirements.
To sum up, this is the dawning of a brave new age of transparency.As always, consult experienced tax advisers in each country at an early stage in specific firstname.lastname@example.org Leon Harris is a certified public accountant and tax specialist at Harris Consulting & Tax Ltd.