April 7, 2016

On June 30, 2014 the Governments of Israel and the United States (the “Competent Authorities”) signed an agreement to improve international enforcement of taxes and for implementing provisions of the Foreign Accounts Tax Compliance Act (FATCA).

In order to implement the FATCA agreement, the Competent Authorities signed on March 23, 2016 the Competent Authority Agreement (the “CAA”), as per Article 3(6) of the FATCA agreement that requires the Competent Authorities to enter into an agreement or an arrangement in order to establish the rules and procedures necessary in order to implement the FATCA agreement.

The CAA regulates the exchange of information to the Internal Revenue Service via the Israeli Tax Authority, which will receive information from Israeli financial institutions. The information relayed will include details on Israeli financial accounts held by U.S. citizens and residents, Green Card holders, or legal entities consisting of material American holdings.

Additionally, the CAA enables the IRS to report on revenue from accounts held in U.S. financial bodies by residents of Israel. Receiving this information will help the Israeli Tax Authorities enforce the Israeli tax law that requires Israeli residents to report and pay taxes on their worldwide income.

In the meantime, the Israeli Ministry of Finance is promoting ratification of the CAA through the Government and in the Knesset, in order to implement the CAA into Israeli law.

For the full text of the CAA click here: https://www.irs.gov/pub/irs-utl/israel_competent_authority_arrangement.pdf