February 2, 2015

The efforts made by the Israeli Tax Authorities (ITS) to combat unreported overseas accounts held by Israelis are beginning to yield results. Swiss banks have toughened their conditions for Israelis continuing to hold accounts. HSBC for example, has gone so far as to close Israeli accounts whose owners had not reported their accounts to the authorities in Israel. UBS & Credit Suisse started sending their Israeli account holders a form that they require to be filled out by their tax adviser and returned to the bank.

According to the form that was sent by UBS, the tax adviser needs to declare to the bank the status of the customer's account in regards to reporting it to the authorities in Israel, and payment of the tax on the money in the account.

The tax advisor must choose one of two options:

1. A declaration that the customer reported the account and paid his tax liability under Israeli law
2. A declaration that he has no indication if the customer reported the account to the ITA and paid his tax liability on it.

Selecting the second possibility will most likely result in the Swiss bank closing the account.

The Credit Suisse form gives the tax advisor three options:

1. A declaration that the client is exempt from tax and from disclosure according to the Israeli Law since he is a returning resident or a new Israeli immigrant
2. A declaration that the client is reporting the account and meeting his legal obligations for disclosure and payment.
3. A declaration that the client filed all the necessary documents in order to participate in the Israeli voluntary disclosure program and pay the tax due.

The question that arises is what happens if the Israeli account owner decides to disclose his account through the ITA’s anonymous track for voluntary disclosure but in the end does not go through with it?

Under the anonymous track, the Israeli client can submit a request without exposing his identity to the Tax Authority, and according to the tax assessment made for him by the ITA, he can choose either to reveal his name and pay the assessment, or to withdraw from the voluntary disclosure proceeding.  What happens in the event that the Israeli client withdraws from the voluntary disclosure proceeding, after his tax advisor has already declared to the Swiss bank that the customer-taxpayer is fulfilling the conditions under Israel law? The tax advisor's course of action is to send another letter to the Swiss bank revising the initial answer. Since the change makes the declaration inaccurate it will put the client in a situation where the bank can decide to close the account.