New Israeli Income Tax Regulations, which were officially published on 6 February 2019 (the "Regulations"), implement the Common Standard on Reporting and Due Diligence for Financial Account Information ("CRS"), which was developed by the OECD.
Under the Regulations, Israeli financial institutions are required to report to the Israeli Tax Authority annually concerning international residents with financial accounts in Israel. The definition of the term "Financial Institution" is very broad, and includes banks, investment funds, investment managers and brokers, entities which hold or manage financial assets on behalf of others, as well as certain insurance companies.
The Regulations impose a retroactive reporting obligation regarding financial accounts. The information on accounts existing in 2017 is to be reported no later than 23 June 2019. Information on accounts existing in 2018 shall be reported no later than 8 September 2019.
On an annual basis Israel will automatically exchange such information with over 95 foreign countries in accordance with the bilateral and multilateral agreements on the exchange of information. As part of the exchange of information, Israel will receive financial information concerning the foreign accounts of Israeli residents (including information on financial income, as well as account balances).
It should be noted that the automatic exchange of information with certain countries, including Australia, Canada and the United Kingdom, will commence retroactively from 2017 onward (Israel will transfer and receive such information in July 2019), while the exchange of information with other countries, such as Switzerland, will commence from 2019 (Israel will transfer and receive information in September 2019).
That said, the Regulations provide that certain charitable funds that provide interest-free deposit and credit services ("Gemach"), will be exempt from collecting account-holder information, and from certain reporting obligations under the Regulations.
In light of the above, entities that are, or might be, classified as an Israeli Financial Institution under the Regulations are advised to examine their status and obligations under the CRS.
In addition, Israeli residents who hold bank accounts or other financial accounts in foreign countries, as well as foreign residents who hold bank accounts or other financial accounts in Israel, should prepare for the exchange of information and settle any potential tax issues with the Israeli Tax Authority.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.