December 18, 2014

The Bank of Israel recently sent Israeli banks a draft procedure requiring banks to receive from their foreign clients a declaration that they have paid the required tax on the income in their Israeli bank accounts in their country of residence.

In general, under the draft legislation, the procedure requires that every foreign resident customer (both new and existing ones) will have to present data about the source of their wealth and income, and declare that he has paid the legally required taxes in their country of residence. In addition, the client is required to sign a consent to waive their right to bank secrecy with respect to any other banking jurisdiction.

The Bank of Israel also allows the banks not to open an account for foreign residents who do not provide all the required data and to freeze an account or refuse banking services in cases that expose the bank to the risk of violating overseas law.

The banks have been forced to require such declarations from their US customers already as part of implementation of the FATCA rules.

Local banks have welcomed the Bank of Israel's rules, which hopefully will end the current lack of clarity about what the banks must require from their foreign resident customers.

Dave Wolf & Co. is a law firm specializing in taxation and wealth management with offices in Jerusalem, Tel-Aviv and New York and affiliate offices in Greater China, London and Amsterdam.

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