Even if you don’t have a secret Swiss bank account, the global financial transparency revolution affects every Israeli who owns assets, works, or invests outside of Israel. In today’s global and digital era, it is relatively easy to hold assets, establish companies, and manage bank accounts overseas. As a result, countries have increased their cooperation in exchanging information, driven by a shared interest in preventing tax evasion and the abuse of tax treaties.
Today, more than ever, it is difficult – if not impossible – to hide money or assets from the watchful eyes of the Tax Authority. Information exchange mechanisms (CRS, FATCA, and international tax treaties) have turned banks into “gatekeepers,” obligated to report to their local tax authorities on financial accounts held by foreign residents. These authorities then transfer the information to the taxpayer’s country of residence, enabling each country to easily access updated information on its residents’ assets and income worldwide.
In this context, it is important to note that in August 2025, the Israeli Tax Authority published a temporary order allowing taxpayers to submit voluntary disclosure requests until August 31, 2026. This procedure enables individuals who have not yet reported assets or income to settle their affairs, pay the required taxes, and receive immunity from criminal proceedings. Immunity is conditional upon full and honest disclosure, payment of all taxes due, and full cooperation with the Tax Authority. This “window of opportunity” is designed to allow taxpayers to “start fresh” before information on their assets and income inevitably reaches the authorities through global information exchange.
How Did It All Begin?
In 2004, the Swiss investment giant UBS was accused of concealing information about the accounts of American clients. The U.S. Senate claimed that UBS had helped clients evade taxes amounting to approximately $20 billion.
The U.S. government demanded that UBS disclose the details of all American clients’ accounts, but UBS initially refused, citing banking secrecy obligations. After lengthy negotiations and threats of sanctions, the parties reached a settlement, and the U.S. government realized it needed binding legislation to address the issue.
The UBS case led to the enactment of FATCA and a dramatic shift in the global financial landscape.
FATCA – The American Revolution in Financial Transparency
FATCA (Foreign Account Tax Compliance Act) is a U.S. law that came into effect in 2010, requiring foreign financial institutions to report to the IRS on accounts held by U.S. citizens or residents.
Under FATCA, financial institutions must automatically report accounts held (directly or indirectly) by Americans. Institutions that fail to comply face severe sanctions, including a 30% withholding tax on all U.S.-sourced payments.
Israel signed a FATCA agreement with the U.S., under which Israeli financial institutions transfer information to the Israeli Tax Authority, which then forwards it to the IRS. At the same time, Israel receives information on accounts held by Israelis in U.S. financial institutions.
Thus, banks worldwide effectively became “information agents” for the IRS.
CRS – The Global Standard for Information Exchange
Following FATCA, the OECD developed the CRS (Common Reporting Standard), a global framework for automatic information exchange between countries. Under CRS, financial institutions collect information on foreign residents and transfer it to their local tax authority, which then forwards it to the taxpayer’s country of residence.
In May 2014, Israel announced its adoption of CRS alongside about 50 other countries. In July 2016, the Knesset approved Amendment 227 to the Income Tax Ordinance, requiring financial institutions to obtain information from account holders to determine their identity and country of tax residence.
Today, more than 100 countries and territories have joined CRS, including jurisdictions once considered “tax havens.” Each year, in March, the Israeli Tax Authority receives detailed financial data from all countries with which Israel has an agreement, enabling it to track Israelis’ assets and income worldwide.
What About Countries Without Agreements with Israel?
If you thought that Cyprus, for example, could still serve as a safe haven from the Israeli Tax Authority, think again.
Israel has tax treaties with specific countries, and only with those countries does it officially exchange information for tax enforcement purposes. However, even in cases where no treaty exists (such as Cyprus), the Tax Authority can still obtain information.
First, through leaks or document seizures, as in the case of the “Panama Papers.” This massive 2016 leak from a Panamanian law firm exposed how politicians, businesspeople, celebrities, and wealthy corporations worldwide used shell companies in tax havens to conceal assets, evade taxes, and sometimes launder money. Following the leak, tax authorities worldwide, including Israel, launched investigations that led to arrests and criminal proceedings.
Second, new treaties are constantly being signed. For example, a tax treaty between Cyprus and Israel is currently being finalized (our firm is involved in the process as a director at the Israel-Cyprus Chamber of Commerce). Once signed, the Israeli Tax Authority will receive retroactive information on Israelis holding assets in Cyprus who have evaded taxes.
Conclusion – The End of Banking Secrecy
In today’s world, banking secrecy is no longer protected as it once was, and financial information is more exposed than ever to tax authorities.
The message is clear: in the era of global financial transparency, it is virtually impossible to conceal income or assets from tax authorities. Attempts to do so are not only doomed to fail but may also result in heavy sanctions, fines, and even criminal proceedings.
What can and should be done is proper, legal tax planning that optimizes tax liability while complying with the law. If taxes have already been evaded, the solution is to settle matters with the Tax Authority through the voluntary disclosure procedure. Under the new temporary order (valid until August 31, 2026), taxpayers can regularize their reporting, pay the required taxes, and receive immunity from criminal prosecution for the offenses disclosed. The process is conducted online, requires full disclosure, and may be handled either through amended returns or a settlement agreement. This is a one-time opportunity to resolve matters with the authorities before the information inevitably reaches them through global information exchange.
For more details on voluntary disclosure – click here.
Nimrod Yaron & Co. has extensive experience assisting clients with voluntary disclosure procedures, asset regularization abroad, and lawful international tax planning. For professional advice to help you navigate the era of global financial transparency – contact us.
Q&A
Can one legally avoid reporting foreign income?
No. Israeli residents must report all income earned worldwide. However, lawful tax planning can optimize tax liability, for example, by using tax treaties, foreign tax credits, or efficient holding structures.
What are the possible sanctions for failing to report foreign income?
Failure to report foreign income may result in severe sanctions, including significant fines, interest and linkage on tax debts, financial penalties, and even criminal proceedings that may lead to imprisonment.
Does the voluntary disclosure procedure guarantee complete immunity from criminal proceedings?
When carried out in full compliance with the rules and conditions, voluntary disclosure may indeed provide immunity from criminal prosecution for the tax offenses included in the request. However, immunity is conditional on full, honest, and genuine disclosure, and the taxpayer must not already be under investigation or audit by the Tax Authority before filing the request. Under the new temporary order (August 2025 – August 2026), applications may be submitted online until August 31, 2026, provided all conditions are met, including full tax payment and cooperation with the Tax Authority.
Is there a difference between reporting obligations for private foreign accounts and foreign companies?
Yes. Israeli residents holding private foreign accounts must report all income earned abroad and deposited in those accounts. For foreign companies, reporting obligations depend on the company’s structure and activities. In cases of a “Controlled Foreign Corporation” (CFC) or a “Foreign Professional Company,” specific reporting and taxation rules may apply. Additionally, it is important to assess whether the company is considered an Israeli resident under the “management and control” test. If so, the company must report all its worldwide income in Israel.
What are the implications of international financial information exchange agreements?
Israelis operating abroad should be aware that all financial activity information is automatically transferred to the Israeli Tax Authority. This means full and accurate reporting of all worldwide income is essential. If there are undeclared assets or income, it is strongly recommended to use the voluntary disclosure procedure under the temporary order until August 31, 2026, to settle matters legally and obtain immunity from criminal prosecution.
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