New immigrants from Ukraine make aliya, December 30, 2014.
(photo credit: REUTERS)
A set of new requirements for new and returning immigrants to fully disclose foreign financial assets was removed from the economic arrangements bill Wednesday, following intense lobbying from the Immigration and Absorption Ministry.
The new law would have eliminated a 10-year grace period for olim in reporting their foreign assets, including assets and activities of companies they controlled. Since the passage of a 2008 law encouraging aliya, the 10-year grace period has been part of a set of wide-ranging benefits meant to make the process of moving to Israel easier and less financially burdensome.
Had the law gone through, as of January 2016, newcomers would have had only a one-year period to report their foreign assets instead.
The controversy speaks to a larger issue of how countries deal with taxing their citizens’ foreign assets and income. Israel has dual taxation treaties with countries such as the United States that exempt earners from paying taxes twice, as long as their income falls below a certain threshold.
Even so, the requirement to report on foreign assets has become more stringent as regulators have begun cracking down on tax evaders and money launderers. As of last year, for example, Israeli banks are required to divulge information to American regulators about any of their bank account holders who are US citizens.
Americans in Israel who are found to have skipped reporting their account information back in the US are liable to face severe penalties and fines.
Israel, too, has begun tightening its grip on what assets Israelis living abroad have to report.
Such processes have led to the discovery of offshore bank havens belonging to Israeli, American and other tax evaders, in places such as Switzerland.
Wednesday’s compromise included an agreement to task a professional committee with formulating a new policy with the Tax Authority that would seek to comply with international standards without deterring aliya.