FATCA and Israel

25 thoughts on “FATCA and Israel”

1. @calgary found this and posted it on another IBS link, but I think a copy here would also be very useful

   http://www.globes.co.il/en/article-israeli-banks-extend-fatca-declarations-to-businesses-1001000686
   “By next year, the US Internal Revenue Service will require all Israeli businesses to declare whether any shareholders are US citizens.”…

   .”….in the case of business customers, the instructions are even broader and apply to those who are not American. As of January 1 2015, Israeli banks are asking every new business customer to declare whether they are incorporated in the US and whether any of the company’s shareholders have US citizenship.

   The forms to be filled are long and complicated and only available in English with no Hebrew version obtainable. …”….

   Just as FATCA as implemented in the UK is imposing costs even on trusts who have NO US connection, so now is FATCA as implemented in Israel imposing costs even on businesses who have NO US connection.

   FATCA is pitting the banks and investment sector who lobbied for a FATCA IGA (in order to offload their liability) against the best interests of other business sectors and family and other trusts and foundations.

2. Thanks, badger. What is next?

3. @calgary, they’re on a collision course with stupid – as they have already passed unjust, illegal and ill conceived.

4. Check this one out. those people are sick in the head.

   The [Israel] Finance Ministry proposes fines and up to 7 years imprisonment for bank employees keeping information from the US.

   http://www.globes.co.il/en/article-treasury-proposes-criminal-penalties-for-fatca-non-compliance-1000942546

5. From a Brocker in Israel today:

   Israel has recently jumped ahead into Orwell’s nightmare of 1984. Israel has basically outlawed all cash transactions of any significant value. This forces all transactions to be in plastic or by wire and funneled through the banks and the computers where everything can be monitored and all privacy will be lost. For a summary read the following article:

   Israeli Times, January 5, 2015, Message to Israelis: Your CASH is no good here.

6. http://www.janglo.net/index.php?option=com_adsmanager&page=display&catid=89&tid=347076

   Hello everyone,

   I applied for my second child’s US birth certificate, who was just born, at the US Consulate in Jerusalem, and they are being really impossible, asking for paperwork from 15-20 years ago that would reflect that I was physically in the US for a period of 365 days consecutively. This is in addition to the regular requirements of a few years in the US, as was requested for my first born (8 years ago).

   Has anyone else encountered such issues? How or what were you able to provide to convince them? I have so far provided all of my college student transcripts, but they are “worried” that I may have gone out of the country during school breaks.

   This is obviously very frustrating as a US citizen who has been keeping up with up to date with tax filing and has business in the US. Does anyone know if there is a limit on the requirement to keep legal docs such as old passports etc.? I can’t find some of them, and i am not sure why they can’t look up any exits and entries in their own computers and are giving me such a rough time.

   Also, if they continue giving me a hard time, does anyone know if I can get a visa for my baby girl? And can I file her paperwork in the US or did I mess up by filing here?

   Thanks in advance for your help and advice.

   The response from an Israeli Brocker:

   It’s quite simple. Some of us are no longer citizens of those countries, we chose to be only Israeli. Most of us for nationalistic / religious reasons, a few of us to end the tax filing madness and expense.

   In addition, we decided to not make our children chattel of the United States and permit them the flexibility of choosing in the future when they are of age if they wish to owe (possibly dual taxes) and paperwork to the US for the rest of their natural lives.

   Some of us are unable to hold fiduciary positions within Israeli companies because of FATCA. Others are unwilling to expose our non American spouses to the IRS taxation. Many are loathe to owe capital gains on a home sold in Israel to the IRS.

7. http://hamodia.com/2016/07/13/mk-rabbi-gafni-fatca-compliance-law-problematic/

   MK Rabbi Gafni: FATCA Compliance Law ‘Very Problematic’

   By Dror Halavy
   Wednesday, July 13, 2016

8. http://www.globes.co.il/en/article-finance-cttee-approves-israel-us-tax-information-pact-1001139266
   ‘The Knesset bill requires financial entities to disclose information about US citizens in Israel to the IRS.’

   “Following weeks of discussions, the Knesset Finance Committee yesterday approved a bill for implementation of the provisions of the US Foreign Account Tax Compliance Act (FATCA)….. “…….

   ……”The Finance Committee changed several clauses in the bill submitted by the Ministry of Finance. For example, in the discussion, it was decided not to retain a clause enabling the Tax Authority to use information sent to the US through it under the agreement with the US for purposes unrelated to the agreement.

   Following prolonged negotiations with the Ministry of Finance, it was decided, among other things, to lighten the financial sanctions imposed on financial institutions failing for technical reasons to meet all the complicated requirement under the law. It was also decided that gamachim (private institutions providing interest-free loans to individuals under Jewish law) would be classified as public benefit companies under the Companies Law, enabling them to continue operating without the FATCA provisions applying to them, because the bill concerns entitles classified as financial institutions. Knesset Finance Committee chairman MK Moshe Gafni (United Torah Judaism) added to the bill an obligation to obtain the Finance Committee’s permission for measures in implementing the law, regulations, and other actions.>”……..

9. Readers might also want to follow discussion here;
   http://isaacbrocksociety.ca/2016/09/01/august-31-2016-israeli-supreme-court-issues-temporary-injunction-against-fatca-enforcement-in-israel/

   Several links there to additional materials.

10. http://www.forbes.com/sites/rogeraitken/2016/09/03/fatca-could-israeli-injunction-on-us-sovereignty-violating-tax-law-prompt-rethink/#2931711122d4
    Sep 3, 2016
    ‘FATCA: Could Israeli Injunction On US Sovereignty ‘Violating’ Tax Law Prompt Rethink?’

11. from
    http://www.bna.com/fatca-delays-cause-n73014447416/
    September 9, 2016
    ‘FATCA Delays Would Cause ‘Severe’ Damage, Israel Says’

    See particularly the links to fulltext of;
    …. ” Text of the government’s rebuttal is available, in Hebrew, at http://src.bna.com/iqt.

    An informal translation of the final, amended petition is available at http://src.bna.com/iqs “

12. http://www.globes.co.il/en/article-fatca-us-israel-tax-data-exchange-begins-sept-30-1001153040
    ‘FATCA US-Israel tax data exchange begins Sept 30’

13. ‘Israel extends first FATCA reporting deadline’

    “……….. Further to the delays following the dealings surrounding the above petition to the Supreme Court in Israel, the Israel tax authorities have – after approaching the US authorities and after having received their agreement – published a postponement of the first release data from the date originally planned in September to November 30, 2016.

    This postponement leaves open a larger window of time for US tax payer accountholders to file objection against the intention of an Israel based financial institution to release information regarding their accounts than was first expected.”

    http://www.lexology.com/library/detail.aspx?g=b4a030d9-d8d3-4482-a4d0-96d1eb7a461f

14. http://www.jewishpress.com/news/breaking-news/israel-tax-authority-fatca-working-both-ways-us-accounts-belonging-to-israelis-reviewed/2017/01/16/
    ‘Israel Tax Authority: FATCA Working Both Ways, US Accounts Belonging to Israelis Reviewed’
    By: David Israel
    Published: January 16th, 2017

    Open for comments. Needs countering to the article claim that the US is ‘working both ways’ and equally reciprocal, as the US is not collecting or sending the exact same equivalent information; ex. bank balances, etc. that the Israelis would be sending under the terms of FATCA.

15. ‘
    Tax Authority presses banks on foreign citizen accounts’
    http://services.globes.co.il/en/article-tax-authority-presses-banks-on-foreign-citizen-accounts-1001187652

16. http://hamodia.com/2017/06/29/125027/

    ‘Small Gemachs to Be Exempt From FATCA Requirements, Ministry Says’
    By Dror Halavy
    Thursday, June 29, 2017

17. https://www.timesofisrael.com/taxed-into-renouncing-their-us-citizenship/
    “…Zell said he would be meeting with members of the Prime Minister’s Office in order to ask the prime minister and the government to postpone a forthcoming vote in the Knesset Finance Committee regarding the tax agreement with the US and Israel….”……

18. Oops, that story above is old, its from 2014.

19. http://webcache.googleusercontent.com/search?q=cache:VniA7w2MgekJ:www.loc.gov/law/foreign-news/article/israel-supreme-court-rejects-challenge-to-constitutionality-of-fatcas-implementation/+&cd=1&hl=en&ct=clnk&gl=ca&client=firefox-b-ab

    “Israel: Supreme Court Rejects Challenge to Constitutionality of FATCA’s Implementation

    (Jan. 25, 2018) On January 2, 2018, Israel’s Supreme Court, sitting as a High Court of Justice, issued its reasoning for its decision of September 12, 2016, rejecting a petition challenging the constitutionality of the Income Tax Ordinance (Amendment No. 227) Law, 5776-2016 (Amendment Law). The main decision was rendered by Justice Hanan Melcer, with Justices Menahem Mazuz and Miriam Naor (Ret.) concurring. (HCJ 8886/15 Foreign Republicans in Israel v. the Government of Israel (Jan. 2, 2018) (in Hebrew), State of Israel: The Judicial Authority website; Income Tax Ordinance (Amendment No. 227) Law, 5776-2016 (Amendment Law), SEFER HAHUKIM [BOOK OF LAWS, SH] 5776 No. 2561 p. 954, Knesset website.)”……………………..

    from this link http://www.loc.gov/law/foreign-news/article/israel-supreme-court-rejects-challenge-to-constitutionality-of-fatcas-implementation/ , choose cached version.

20. Thanks for that, badger.

    Enlightening. In a dispiriting kind of way.

21. From the link posted above by badger:

    The petitioners argued that the Amendment Law harms the right to equal treatment as it subjects US account holders to a different legislative system from that which applies to the rest of taxpayers in Israel.
    [..]
    Melcer rejected the claim that US account holders were discriminated against in comparison with those not subject to the reporting requirements. In his view, the information sharing with US tax authorities increases equal application of tax obligations, thereby eliminating the distinction between taxpayers who paid tax and those who evaded their tax obligations.

    I suspect courts in my EU country would take a similar view; leaving anti-FATCA discrimination lawsuits no leg to stand on.

22. @plaxy; yes, it is dispiriting. Especially; “….the information sharing with US tax authorities increases equal application of tax obligations, thereby eliminating the distinction between taxpayers who paid tax and those who evaded their tax obligations….”. What? Those taxpayers “paid tax” – to Israel, their home and actual residence, the place where they live, work, generate income and save it. Is he saying that whenever and wherever in the world a foreign nation asserts a claim to Israeli generated and sited assets he is happy to assist the foreign claim because otherwise it would be tax evasion? Or is he only asserting this because it is the US?

    But, the EU isn’t Israel and neither is Canada or France. We shall see how it all shakes out.

23. badger – “Is he saying that whenever and wherever in the world a foreign nation asserts a claim to Israeli generated and sited assets he is happy to assist the foreign claim because otherwise it would be tax evasion?”

    I think he’s jsaying that reporting accounts to the tax agencies in the accountholder’s country or countries of tax-residence is not discriminatory because it applies to all residents in similar circumstances (resident and tax-resident in Israel, and also tax-resident in US). Though I don’t know much about these things, not being a lawyer.

    “Or is he only asserting this because it is the US?”

    I don’t suppose it would be any different if Mexico or New Zealand suddenly took up CBT; Israeli residents with Mexican or NZ citizenship would get their Israeli accounts reported to their countries of tax-residence.

    “the EU isn’t Israel and neither is Canada or France”

    Indeed, Canada and France each have specific laws which (as far as I can see) could result in the IGA being ruled against. The EU doesn’t have any such laws, so the chances of an anti-FATCA case being taken to the ECJ seem to me greatly diminished by the Israeli ruling.

    “We shall see how it all shakes out.”

    Yep.

24. I still don’t see how they can lawfully discriminate on the basis of birthplace and national origin as part of the US indicia used as the basis of FATCA reporting by the banks. What is ‘similar’ about a birthplace as the sole basis treated as justifiable grounds for discrimination?

    Can they cherry pick how to define ‘similar circumstances’ so that it works for whatever result they wanted to arrive at? If they really want to treat similarly situated Israeli citizens and residents the same, they’d have to start identifying all those in Israel who have inherited US citizenship (and thus US taxable status) via parentage – which we have had no reports of countries actively doing. It might ‘apply’ to all those that FATCA is intended to apply to, but in the end result it is being enforced by IGA signatories against only a subset of people. So far we are not being forced (yet!) to start proving the status of our parents and whether they did or didn’t live in the US long enough to transmit the status, and so far I have not had to prove (but I suppose it could happen due to the immutable fact of a US birthplace that will appear on documents like my death certificate) that I was not in the US long enough to transmit to any Canadian offspring.

    Still don’t see how discrimination based solely on a birthplace – or parentage can stand.

    Hopefully that will not be the case elsewhere.

25. “I still don’t see how they can lawfully discriminate on the basis of birthplace and national origin as part of the US indicia used as the basis of FATCA reporting by the banks.”

    That’s what I was thinking, until I read that Israeli ruling. Now I think that a suit on the grounds of discrimination would have to show harm. They don’t see reporting a USC’s account to the US tax agency as causing harm.

    “Can they cherry pick how to define ‘similar circumstances’ so that it works for whatever result they wanted to arrive at?”

    There’s a Non-Discrimination Article in the standard US double-tax treaty – the treaty the IGA is hooked to. It’s not discrimination, treating USCs differently from non-USCs.

    As I say, I’m not knowledgeable about these issues, not being a lawyer. ICBW