An audio link to the interview on You Tube can be accessed by clicking HERE
Q1. The tax world seems to be in flames, with tax authorities all over the world on the warpath. Is this real?
A: Very much so. There has never been so much exchange of information between treaty countries. The OECD has its foot on the gas and is pressuring members. New agreements of disclosure are being closed with non-treaty and offshore jurisdictions. Banks are committed to supplying information on clients. ITA officials state openly that they have never had so much information available.
Q2. Is this behind the new tax amnesty? Should people be giving serious though to full tax disclosure, given what you say?
A: Without a shadow of a doubt. The risks of non-disclosure are substantial, and this new voluntary disclosure procedure will enable taxpayers to clear the record and join the tax mainstream. In fact, for the first 12 months of the new amnesty, the applications may be done anonymously. Under certain circumstances, there is a "fast route" available for relatively smaller amount of assets and income not previously disclosed. It is important to note that residential property owners who have not reported on rental income may do so with the minimal reporting and taxes.
Q3. How far back does the amnesty go? Is there a statute of limitation? Will penalties be charged?
A: There is, indeed; the period is up to ten years generally. The ITA has indicated that penalties will not be levied. Where an amnesty is for a person who has passed away, the period may be limited to 4 years.
Q4. Is this a long and arduous process? What do you counsel?
A: The process is generally not short, despite attempts by the ITA to limit the time for submitting and processing applications. But given the new tax world we live in, there are no better, nor more tax efficient, alternatives. It certainly would behove those who are not within the tax system, or have not submitted full and accurate reports, to do so now.
Q5. And we have new tax laws relating to foreign trusts. How will this impact on us mortals?
A: Well – the days of avoiding taxes on trust income are pretty much over. The existence of an Israeli resident beneficiary obligates the trustees to report on his/her "share" of the trust income, even where the trust is fully discretionary. Beneficiaries and trustees should take professional counsel – and do so now – as the new laws are effective as of 2014.
There are special provisions for foreign "family trusts" which enable the trustees to elect to be taxed on distribution instead of on trust income.
It would appear that there are Israeli-resident trusts which should have been registered and reporting prior to 2014; here the trustees ought to take advice on how to proceed. New residents and returning residents who are within the 10-year tax holiday may be exempt from taxes and reporting on trusts.
Trusts are not well-known, nor understood, in Israel, as they originate from the Anglo-Saxon World. Professional counsel and due care should be taken in reporting.