volutary disclisure hagi
TRANSCRIPT
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The "Voluntary Disclosure"
A window of opportunities
Breakfast Seminar
The Alden Hotel - Zurich
26.01.2012
Hagi Elmekiesse, CPA (Adv),
partner
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Personal background
CPA and Advocate (Israel).
Worked at the Israeli Tax Authority.
One of the founders of the International Tax Unit at the
Israeli Tax Authority, January, 2001.
International Tax Partner at Artzi, Hiba & Elmekiessse.
Specializes in international taxation and in complicated
tax settlements with the Israeli Income Tax Authorities.
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Tax Settlements until 2002- before the
reform
Commencing from January 1, 2003, the tax laws in
Israel determined a “personal” tax method instead of
the “territorial” method.
Even prior to the reform, an Israeli resident was
liable to tax on foreign capital gains.
After the reform, an Israeli resident is liable to tax on
income that is generated or produced in Israel or
abroad.
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Tax Settlements until 2002- before the
reform
Within the International Tax Unit in the ITA
hundred of tax settlements were made: 5%-25% of
the “foreign” accumulated profits were collected.
The tax settlements were made with the
collaboration of the assessing offices in Israel.
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Purpose of the “Voluntary
Disclosure” and its conditions
Purpose:
Receiving immunity from the ITA regarding
criminal sanctions (interrogations, arrests,
indictment/criminal fines).
Disclosure of income, assets and funds that were not
reported to the ITA in the past.
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Purpose of “Voluntary Disclosure”
and its conditions
Conditions:
A truthful application, not resulting from an investigation
or examination conducted by the ITA.
No prior information in possession of the Tax Authority
or any other govermental authority related to the
voluntary Disclosure.
No examination was made in the ITA at the civil level.
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Purpose of “Voluntary Disclosure”
and its conditions
Conditions:
Published media information as well as information
included in documents submitted to Israeli courts are
considered as information in the possession of the ITA.
Removal of the civil infringement (tax payment).
Temporary favorable procedure of voluntary disclosure
(until 30.6.2012) parallel to the existing procedure (see
Ran’s presentation).
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Preparation of an application to a
voluntary disclosure- procedure
Two steps when dealing with a potential client:
Step 1: Gathering data & documents and
analyzing the tax exposure.
Step 2: Applying to the ITA to settle the
criminal and civil infringement.
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Step 1: Gathering data & documents and
analyzing the tax exposure
During this stage there is no contact with the ITA.
Gathering of all the facts to be used as background
when preparing the application,
Explanations regarding the funds’ origin (gift?
Inheritance? Trust distribution? Etc’)
Preparation of supporting documents regarding the
funds’ origin and the funds’ yields.
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Step 1: Gathering data & documents and
analyzing the tax exposure
With respect to bank accounts:
Supporting documents regarding: account’s opening date,
account’s ownership, dates in which changes were made in
the account (adding/ removing a person to/from the
account)
In case an account was closed and all funds were
transferred to a new account/ accounts - it is required to
receive information on the first account as well.
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Step 1: Gathering data & documents and
analyzing the tax exposure
Bank data for each year ends- 31.12.X.
Bank data regarding yields (interest, dividend, realized
capital gain).
The more information we receive on previous years- a
better outcome may be achieved for the client.
10 years limitation to hold information in Swiss banks.
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Step 1: Gathering data & documents and
analyzing the tax exposure
Analyzing the tax exposure:
Calculating the tax exposures in Israel regarding
incomes accrueded in the account.
Evaluating the tax exposure regarding the fund’s
original deposits or the fund’s balance at a specific
date.
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Step 2: Applying to the ITA to settle the
criminal and civil infringements
Settling the criminal infringement :
Written application to the ITA including the case’s
background, facts and details regarding the income
amounts not reported over the years.
Explaining the evaluations made regarding the tax “deficit”
to the ITA over the years.
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Step 2: Applying to the ITA to settle the
criminal and civil infringements
Settling the criminal infringement:
The ITA examines possession of prior information related to the
Voluntary Disclosure, in the ITA, other governmental
authorities, published media and judiciary documents.
Answering questions/ delivering clarifications to the
investigating unit in the ITA and transferring documents- as
requested.
Receiving approval that no criminal prosecution will be
conducted- “Insurance policy”
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Step 2: Applying to the ITA to settle the
criminal and civil infringements
Settling the civil infringement:
Applying to the civil tax assessing office.
The application is made parallelly or after the
application to a voluntary disclosure is made.
In some cases- possibility to apply anonymously to
the assessing officer before the application to a
voluntary disclosure.
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Step 2: Applying to the ITA to settle the
criminal and civil infringements
Settling the civil infringement :
Negotiating with the ITA regarding tax liability concerning
the fund’s original deposits or the fund’s balance at a specific
date.
Special procedurs and tax rates to settlements regarding
trusts, under conditions.
When lack of information- risk of higher effective tax rates
on the funds.
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Step 2: Applying to the ITA to settle the
criminal and civil infringements
Settling the civil infringement :
A fund received by way of inheritance or gift, derived
from income generated in Israel or abroad on which tax
was paid or no tax was due in Israel-may not be subject to
tax.
Interest and Dividends before 2003- Not subject to tax.
At the end of the civil procedure- an agreement with the ITA
is signed, settling the funds and detailing the total tax to be
paid.
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Service costs
Step 1 (Gathering data & documents and analyzing the
tax exposure)- according to hours invested. Usually
limited.
Step 2 (Applying to the ITA to settle the criminal and
civil infringements)- depends on the scope of the
work. Usually based on a success fee.
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Case examples
1. Settling inheritance funds:
Client referral by a Swiss banker.
Funds in bank account for decades.
Origin of the funds- previous generation (deceased),
engaged in business abroad prior of immigrating to
Israel.
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Case examples
2. Settling trusts funds:
Client referral by a Liechtenstein trustee.
Funds in German bank account.
Origin of the funds- Recovery of assets by the
German authorities and compensations to
descendants of Holocaust victims.
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Case examples
3. Settling fund coming from unreported e-commerce
activity
The subject came up during a common consulting
meeting concerning international tax consulting and
structuring.
Origin of the funds- e-commerce activity.
Uncertainty regarding tax liability in Israel.
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Thank you! You are welcome to visit our Web-site:
www.ahe-tax.co.il
Hagi’s e-mail : [email protected]