Come the end of September 2016, the Israeli Tax Authority will start forwarding data collected on U.S. citizens and green card holders with financial accounts in Israel to the U.S. Internal Revenue Service (IRS).
This transferring of information is part of FATCA (the U.S. Foreign Account Tax Compliance Act of 2010), based on an agreement between Israel and the United States.
While FATCA applies on a worldwide basis, the U.S. has entered into intergovernmental agreements (IGAs) with over 100 countries to facilitate the gathering of the information required from financial institutions located in those jurisdictions. Under the IGA with Israel, Israeli financial institutions report the required information to the Israeli tax authorities, who will forward the information to the IRS. The IGA with Israel is a “reciprocal” IGA, which means that the IRS will also collect and share with Israel certain information regarding accounts held in U.S. financial institutions by Israeli citizens and residents.
Under FATCA, 30 percent will be withheld on certain payments (such as interest, dividends, annuities, royalties, etc.) received from the United States (regardless of whether such payments have any relationship to their U.S. account holders) if the financial institution does not provide the information under the Israeli IGA , or if it fails to issue information reports concerning U.S. taxpayers with Israeli accounts. Under the IGA, Israel implemented the U.S. FATCA regulations into their own legal system and pursuant to such Israeli law, it may impose interest/penalties/withholding taxes on any financial institution that does not comply.
For more information, please see Barbara Kaplan’s article on the topic featured on Ynet, one of the leading news platforms in Israel. Read the full Hebrew article here.
Barbara T. Kaplan is the co-chair of Greenberg Traurig’s Global Tax Practice; and chair of its New York Tax Practice. Named one of the top 50 women lawyers in New York City by Super Lawyers magazine, she focuses her tax litigation practice on domestic and foreign corporations, partnerships, and individuals in federal, state, and local tax examinations, controversies and litigation, including administrative and grand jury criminal tax investigations.