Israel is entering a new Voluntary Disclosure Procedure!!

Newsletter May 2024

Israel is entering a new Voluntary Disclosure Procedure!!

Shay Aharonovich, Director of the Israeli Tax Authority (ITA), announced at the Eli Hurvitz Conference on Economy and Society that a new Voluntary Disclosure procedure will soon be published. This procedure will include the payment of the principal tax amount for undeclared income, along with interest and linkage differentials, but without fines or prosecution.

Voluntary Disclosure is a process previously initiated by the ITA several times, aiming to regularize taxpayers’ tax liabilities. This is done through a request to the ITA to correct previously submitted reports or to report income that has not yet been declared.

It is important to emphasize that failure to report income constitutes a criminal offense that can lead to a tax investigation and even the filing of an indictment. This is in addition to the civil tax payments, which include fines, interest, and linkage differentials.

According to the Director of the ITA, the new procedure will be primarily aimed at cryptocurrency holders, but also at other populations who have not yet reported their income. The Director added that this procedure will remain in effect until the end of 2025 and will be the last in the series of Voluntary Disclosures. Afterward, the issue of Voluntary Disclosure will be enshrined in legislation that will clearly define the penalties for those who disclose late.

In previous Voluntary Disclosures procedures, the taxpayer had to submit a well-founded and bona fide request to the ITA. The request needed to be sincere and complete, not resulting from an investigation or audit by the ITA or any other Governmental Authority (whether the information sought to be disclosed to the ITA is included in a legal proceeding or has been published). In other words, the taxpayer needs to disclose new information that the ITA has no prior knowledge of.

Examples of “Classic” reports in the voluntary disclosure process:

1. Undeclared income from funds in bank accounts outside of Israel;
2. Income from trading in cryptocurrencies;
3. New immigrants (first-time residents) or veteran returning residents within the tax exemption period (10 years from the date of becoming residents of Israel) who generated income from a business or salary abroad while the activity was conducted in Israel, but the income was not reported, or taxes were not paid on it in Israel.

We note that our office has extensive experience in handling Voluntary Disclosure procedures with the ITA, which is covered under Attorney-Client privilege. Such a process requires extensive preparation before submitting the request, and therefore, we recommend that clients for whom this matter is relevant seek professional advice even before the formal procedure is published.

For more information, you can contact Doron Elmekiesse, ADV. (CPA) from our firm.

The purpose of this memorandum is to provide you with general information on various topics. The laws themselves are more complex and include additional exceptions. Accordingly, the contents of this memorandum should not be applied without consulting the appropriate professional authority in our office.