The Israeli and US governments have signed an agreement aimed at improving international tax law enforcement and implementing the provisions of the US Foreign Accounts Tax Compliance Act (FATCA).
The agreement regulates the transfer of information to the US Internal Revenue Service (IRS) via the Israel Tax Authority, which will obtain the information from Israeli financial institutions. The kind of information that will be transferred will include details of financial accounts held in Israel by US citizens, US residents, holders of US work permits (green cards), or a legal entity in which US citizens have a material holding.
The agreement also covers reporting by the IRS on Israeli residents' US accounts.
The first date for the transfer of information is September 30, 2015. The initial transfer will cover data on American account holders and the balances on their accounts at the end of 2014.The Israel Tax Authority is shortly expected to sign an agreement with the IRS setting out procedures for information exchange.
Appendix 1 of the agreement sets out guidelines for financial institutions on how to identify accounts that will be subject to the reporting requirements. Appendix 2 lists entities and types of account will be exempt from the requirements. Pension fund managers will not be obliged to report on pension savings accounts, and entities that present a low risk of tax avoidance, such as advanced trainings funds, provident funds for special purposes like sickness and vacations, and trustees of employee options schemes, will also be exempt.
"This agreement represents a milestone in international cooperation in the form of exchange of information between tax authorities," said State Revenue Commissioner Frieda Yisraeli CPA, who headed the Israeli team in the negotiations. "We will work to ratify the agreement in the government and the Knesset and to give it the force of law in Israel. Nevertheless, since the agreement has not yet come into force and there is no legal obligation for financial institutions to carry out identification procedures as set out in Appendix 1 at this stage, we will shortly submit a request to the US Treasury Department that the examination of new accounts should be deferred in the transition period," Yisraeli added.
Published by Globes [online], Israel business news - www.globes-online.com - on July 2, 2014
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