At the beginning of November, over 220 Israelis received a letter from the Tax Authority that read: “We would like to inform you that an income tax case has been opened for you… case type 93 – an employee whose income comes from several sources of income with withholding tax or income from abroad… you are required to submit annual reports from 2018 And so on.” The letter was signed with the sentence: “We wish you success and hope for cooperation with our offices.”
● Do you have an account abroad? The Tax Authority is following you: “Hundreds received letters this week”
● Suspicion: 20 Israelis held NIS 85 million in unreported accounts abroad
The requested “cooperation” is actually a demand by the Tax Authority from those citizens who received the letters from it, to reveal to it all the income they have hidden so far in accounts around the world. Each of the people who received the letter had a different date and a different assessment office written on it, but the principle of each of the letters is the same: the Authority informed everyone who received the letter that he was caught as someone who hid money in bank accounts abroad, and the time had come for him to report. The Authority opened files for everyone Income Tax, and included them in the reporting circle.
Later in the letter – under the heading “Explanation on submitting reports for holding a bank account outside of Israel” – the Tax Authority explains to the writer that “from data in the possession of the Tax Authority it appears that you hold an account in a banking corporation outside of Israel, and therefore you are required to submit an annual report to the Tax Authority”.
The Authority refers the writers to the provisions of Section 131 of the Income Tax Ordinance, according to which an individual resident of Israel must, among other things, submit an annual report to the Tax Authority, if one of two conditions is met: holding an account in a banking corporation outside Israel whose balance in the tax year exceeds NIS 1.87 million, and the income generated in the account exceeds on NIS 337 thousand in the tax year; and the holding of the account in a banking corporation outside of Israel in which revenues grew for which tax advances were not paid legally.
“In light of the above, you are required to submit reports for the tax years 2019, 2019, 2020 and 2021 within the time period specified in the letter announcing the opening of Case 93,” the letter of demand reads. “As long as you hold the bank account in the foreign corporation prior to the 2018 tax year, you are required to submit additional reports for the tax years as well, beginning with the tax year in which the account was opened.”
The 220 letters sent out at the beginning of November are only part of a national operation by the Tax Authority “to locate individuals who hold bank accounts outside of Israel”. During the coming period, the Tax Authority will send hundreds of additional letters to citizens, including a demand to open a file and submit reports according to Section 131 of the Income Tax Ordinance.
The letters are the product of 90 lists that came to Israel from tax authorities around the world, through which it was revealed where the Israelis keep accounts that they have not reported until now. The countries in which the largest amount of accounts in the name of Israelis have been reported so far are: the USA (about 19% of all the accounts reported), Switzerland (about 10.5%), Great Britain (about 9.6%), France (about 6.1%) ) and Romania (about 5%).
The average amount of the balance in the account, among the accounts located, was NIS 5 million – while the common amount was about NIS 4 million. However, cases were located and opened for trusts and individuals with accumulated capital of hundreds of millions of shekels.
A product of cooperation between the Tax Authority and its counterparts
Today, the IRS receives detailed information from the US under the FATCA agreement, under which the IRS began to transfer information to its American counterpart (IRS) about the financial assets of citizens with ties to the US, and in return – to receive information about Israelis who have accounts in the US At the same time, the Authority receives information within the framework of the CRS, which establishes an automatic exchange of information regarding the financial accounts of foreign residents in Europe and other countries.
The information received by the Tax Authority starting in 2019 led to the disclosure of hundreds of bank accounts of Israelis abroad, in which tens of millions of shekels were deposited that were not reported to the Israeli authorities. Some of the cases were transferred to investigations and criminal proceedings, and in recent years several indictments were filed against Israelis who did not report fat bank accounts occur.
These are usually cases where it turns out that huge amounts of money and income have been disappeared over the years, and that prohibited actions have been taken in order to hide the funds from the state. Thus, for example, as part of an arrest operation from last May, about 20 suspects were interrogated whose names were included in the lists of bank account holders obtained according to agreements for the exchange of information between countries in accordance with the CRS procedure, which revealed unreported funds to the extent of over NIS 85 million.
One of the suspects, a resident of Safed, was investigated on suspicion of holding bank accounts abroad between the years 2017-2022 in the amount of approximately NIS 6.5 million. From the application for release on bail submitted in his case by the assessor investigating Haifa and the North, it emerged that the suspect regularly withdrew from the bank accounts through A credit card that he has about 8,000 NIS every month, and this, in addition to withdrawing an amount of 150,000 dollars in cash through financial service providers (FSP) from Jerusalem. According to the suspicion, this activity was intended to hide the existence of the account from the Israeli tax authorities.
“The Authority will continue to track down those who do not report”
Other account holders whose names have been disclosed to the Tax Authority, and are not investigated in the criminal process, are transferred to a civil treatment process – income tax files are opened for them, and they are asked to report.
The Tax Authority stated that “in the near future, the Authority intends to continue to locate individuals, companies and trusts that do not comply with the reporting obligations set forth in the law, and to carry out appropriate enforcement actions.”