Many Israelis holds foreign bank accounts abroad including in Switzerland, Germany, Spain, and the United States. These accounts frequently generate income, such as capital gains, interest, and dividends. While Israeli tax law requires residents to pay taxes on this income, there is no automatic withholding tax from income derive from overseas accounts.
Failure to disclose and pay taxes is a criminal violation that can also result in civil penalties. Given the increased information exchange between banks and tax authorities around the world, particularly under CRS regulations(Common Reporting Standards), the likelihood of tax exposures has increased.
Transferring money to an Israeli account increases this risk. Banks’ restrictions have been more stringent in recent years. Before approving big amounts transfer, banks frequently request accountant’s approval verifying that all appropriate taxes in all relevant territories have been paid.
In order to avoid this, it is recommended to settle the tax debt with Israel tax authorities, which is a kind of voluntary disclosure procedure. For more information regarding the voluntary disclosure procedure click here. During the settlement of the tax liability, we can draft an accountant’s approval for the bank and clarify that we are simultaneously handles and reporting the tax payment for the client, in order not to “stuck” the requested bank transfer. For more information in connection with money transfers from banks click here.
If you have an unreported bank account in any foreign country and didn’t pay income taxes, you can still settle your tax liabilities although the formal voluntary disclosure procedure is not in effect. The voluntary disclosure procedure is expected to be renewed soon, but the conditions are stricter (for example, a ransom demand), so in our opinion it is not recommended to wait for the formal renewal of the voluntary disclosure procedure.
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