The U.S. and Israel agreed to a unilateral tax sharing agreement in which both nations will share data pertaining to offshore accounts held by their respective residents.
The agreement aims at improving international tax law enforcement and implementing the provisions of the US Foreign Accounts Tax Compliance Act (FATCA). The pact calls for the Israel Tax Authority to turn over information on American account holders to the IRS in America by September 30, 2015, but since the pact has yet to be ratified by the Knesset, Israeli authorities will put a temporary hold on enforcing the process.
The Finance Ministry’s Frida Israeli, who headed up the negotiations team, hailed the pact, saying, “The agreement marks a milestone in international cooperation in exchanging information between tax authorities.”
The agreement places Israel among the already 28 nations who have who have signed onto the U.S. Foreign Accounts Tax Compliance Act (FACTA) which was created to hunt down U.S. individuals and corporations using accounts in foreign nations as tax shelters.
Appendix 1 of the agreement sets out guidelines for financial institutions on how to identify accounts that will be subject to the reporting requirements. Appendix 2 lists entities and types of account will be exempt from the requirements. Pension fund managers will not be obliged to report on pension savings accounts, and entities that present a low risk of tax avoidance, such as advanced trainings funds, provident funds for special purposes like sickness and vacations, and trustees of employee options schemes, will also be exempt.