After the last Voluntary Disclosure Procedure expired at the end of 2016, the Israeli Tax Authority (thereafter: “ITA”) published a New Voluntary Disclosure Procedure on December 12, 2017, which will be in force for 2 years (2018-2019), except in the case of an anonymous procedure which will expire already on December 31, 2018.

Like the last Voluntary Procedure, also the new one provides for the following three different routes:

Under the Regular Route, the taxpayer will submit an application to the investigations Department of the ITA. The application should include the taxpayer’s details as well as the amount of undeclared income, the amount of undeclared capital and the estimated tax due.

The Anonymous Route enables the submission of an anonymous application without disclosing the details of the taxpayer. This application will be reviewed by the relevant tax assessment officer and only after conclusion of the negotiations about the tax liability will the identity of the taxpayer be disclosed to the tax authorities. The temporary rules set forth a period of 180 days in order to conclude an agreement with a possibility to prolong the negotiation period by another 90 days. In case an agreement is not reached the application will be rejected and all details and information submitted could be used as evidence in any civil or criminal procedure. This route will be in force until the 31 December, 2018.

The Shortened Route is possible where the capital involved in the voluntary disclosure application does not exceed the amount of NIS 2,000,000 and the taxable income derived from this capital does not exceed NIS 500,000 in the relevant tax years. With this route the application must include the identity of the taxpayer. The application is submitted by way of amended tax returns for the relevant years. If the application is accepted, the tax authority will issue an invoice with the amount of tax due, which is to be paid within 15 days of its issuance.

The tax authority lay out certain conditions in the Voluntary Disclosure Procedure under which the taxpayer will receive immunity from criminal proceedings. One of the main conditions is that at the time of the submission of the application for Voluntary Disclosure, no investigation or examination is conducted against the taxpayer and the ITA has no information about undeclared income of the taxpayer. It is important to notice that there is no immunity if the origin of the income is from illegal activities. Furthermore the ITA will not grant immunity if the application is not fully complete and true and the tax is not paid within the period stated in the agreement or within 15 days from the date of payment notice in the case of the application submitted under the Shortened Route.

The result of the procedure is not the reduction of any tax liability. Rather, the taxpayer has to pay the applicable tax liability on the declared income.

The NEW Voluntary Disclosure Procedure provides probably the last opportunity for taxpayers to come forward and disclose his/her undeclared income and assets before the Israeli Tax Authority will get hold of the information under the implementation of the Common Reporting Standard (CRS).