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Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: Israel 2013
PHASE 1
July 2013 (reflecting the legal and regulatory framework as at April 2013)
This work is published on the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the OECD or of the governments of its member countries or those of the Global Forum on Transparency and Exchange of Information for Tax Purposes. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.
Please cite this publication as: OECD (2013), Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: Israel 2013: Phase 1: Legal and Regulatory Framework, OECD Publishing. http://dx.doi.org/10.1787/9789264202535-en
Series: Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews ISSN 2219-4681 (print) ISSN 2219-469X (online)
The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.
OECD 2013
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TABLE OF CONTENTS 3
Table of Contents
About the Global Forum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Information and methodology used for the peer review of Israel . . . . . . . . . . . . . 9 Overview of Israel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 General information on legal system and the taxation system . . . . . . . . . . . . . . .11 Recent developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 Compliance with the Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 A. Availability of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 A.1. Ownership and identity information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 A.2. Accounting records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 A.3. Banking information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 B. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 B.1. Competent Authoritys ability to obtain and provide information . . . . . . . . 50 B.2. Notification requirements and rights and safeguards. . . . . . . . . . . . . . . . . . 57 C. Exchanging Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C.1. Exchange-of-information mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C.2. Exchange-of-information mechanisms with all relevant partners . . . . . . . . C.3. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C.4. Rights and safeguards of taxpayers and third parties. . . . . . . . . . . . . . . . . . C.5. Timeliness of responses to requests for information . . . . . . . . . . . . . . . . . . 59 60 67 69 70 71
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4 TABLE OF CONTENTS Summary of Determinations and Factors Underlying Recommendations. . . . 73 Annex 1: Jurisdictions Response to the Supplementary Report . . . . . . . . . . . 79 Annex 2: List of All Exchange of Information Mechanisms . . . . . . . . . . . . . . . 80 Annex 3: List of All Laws, Regulations and Other Material . . . . . . . . . . . . . . . 82
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PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK ISRAEL OECD 2013
EXECUTIVE SUMMARY 7
Executive Summary
1. This report summarises the legal and regulatory framework for transparency and exchange of information in the State of Israel 1 (hereafter Israel). The international standard which is set out in the Global Forums Terms of Reference to Monitor and Review Progress Towards Transparency and Exchange of Information, is concerned with the availability of relevant information within a jurisdiction, the competent authoritys ability to gain timely access to that information, and in turn, whether that information can be effectively exchanged with its exchange of information partners. 2. Israel is a coastline country in the Middle East region politically organised as a parliamentary democracy. The Israeli economy is highly developed technically and mainly based on the service sector and high-tech technologies. Government expenditure plays an important role in Israeli economy constituting relatively high share of the GDP. 3. Relevant entities include companies, partnerships, trusts and associations. Commercial laws and tax laws ensure availability of ownership and identity information consistent with the standard for all companies, partnerships and associations. Nevertheless, companies other than those registered on the stock exchange may issue bearer shares and no requirements exist to identify the owners of such bearer shares. However, only 12 out of a total of 325 694 companies incorporated in Israel are reported to have issued bearer shares. Ownership information of foreign companies that are managed and controlled in Israel by new immigrants or veteran returning residents is not fully ensured as they are tax exempt for 10 years. With regards to trusts, obligations exist under the tax and trust law that ensure availability of information on Israeli as well as foreign trusts other than foreign resident settlor trusts.
1.
The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.
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8 EXECUTIVE SUMMARY
4. The legal framework of Israel contains obligations to keep reliable accounting records and underlying documentation for at least five years in respect of domestic companies, partnerships and associations. Trustees are also required to keep records in accordance with trust law. Companies incorporated in another jurisdiction but managed and controlled in Israel are required by tax law to have adequate accounting books and underlying documentation for at least five years. However, a gap in this regard remains for foreign companies that are managed and controlled by new immigrants and veteran returning residents. Anti-money laundering laws ensure that all records pertaining to the identity of account holders consistent with the standard are kept by all banks operating in Israel. However, some concerns remain about records of transactions below an amount of NIS 10 000 (EUR 2 000). 5. The Israeli tax administration has broad powers to access relevant information from any person including banks and from public authorities. However, there are some limits on these powers in respect of information relating to new immigrants or returning veterans during a 10 year tax exempt period and in respect of foreign resident settlor trusts. Currently, the Israeli competent authority does not have powers to give effect to the agreements solely for the purposes of administrative assistance (e.g. TIEAs). The scope of professional privilege in Israel is consistent with the international standard. 6. Israel has a considerable network of 54 double tax conventions that provide for exchange of information in tax matters. The vast majority of these agreements are in force and to standard. Nevertheless, Israel should continue its program of renegotiation of DTCs to incorporate wording in line with the OECD Model Tax Convention and should ensure that it is able to enter agreements for exchange of information (regardless of their form) with all relevant partners. 7. Israels response to the findings in this report, in particular the recommendations made, as well as the application of the legal framework and the implementation of the international standard in practice, will be considered in detail in the Phase 2 review of Israel, which is scheduled to commence in the second half of 2013.
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INTRODUCTION 9
Introduction
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10 INTRODUCTION
Overview of Israel
11. Israel is a relatively small State located in the Middle East region with an area of 22072 sq km and a population of 8 million (Feb 2013 Central Bureau of Statistics estimate), of which roughly 804 500 reside in the capital city of Jerusalem. Israel lies on the east coastline of the Mediterranean Sea and borders Lebanon, Syria, Jordan and Egypt. Hebrew and Arabic are the official languages; however English and Russian are also widely spoken. The official currency is the New Israeli Shekel (NIS). 12. Israel is a highly developed country with a GDP of NIS 929.8 billion (EUR 187.6 2 billion) in 2011. Sixty-two percent of Net Domestic Product is produced in the service sector, followed by industry with 20% and agriculture 1.8%. In the year 2011, the financial services produced 25% of the services sector contribution to the NDP 3. 13. Israel has a technologically advanced market economy. It depends on imports of crude oil, vehicles, raw materials, and military equipment. Cut diamonds, high-technology equipment, chemicals, medicine and agricultural products (fruits and vegetables) are the leading exports 4. Israel used to post sizable trade deficits, which were covered by tourism and other service exports, as well as significant foreign investment inflows. In 2009-10 Israel recorded trade deficit amounting to about 3% of GDP. Nevertheless, there was a current account surplus in the balance of payments. In 2011, the current account surplus has reduced and leveled off. Natural gas fields discovered off Israels coast during the past two years can lead to a further expansion of Israeli exports in coming years and decrease its need for energy source imports. 14. The global financial crisis of 2008-09 spurred a brief recession in Israel, but the country weathered the crisis with solid fundamentals following years of prudent fiscal policy and a resilient banking sector. The economy has recovered better than most advanced and comparably sized economies. GDP grew in 2008 by 4.14 % (in constant prices), followed by 1.1% in 2009. In 2010 and 2011 the GDP growth bounced back to 5 % and 4.6% followed by 3.2% in 2012 5. 15. Government expenditures play a significant role in the Israeli economy. Its share of the GDP peaked at around 70% in the mid-1980s accompanied by high levels of debt. In recent years the Israeli government
2. 3. 4. 5. As of 5 June 2012: EUR 1 = USD 1.2429 and USD 1 = NIS 3.896. Source: European Central Bank. www.cbs.gov.il/shnaton62/st14_02x.pdf. Central Bureau of Statistics press release on 21 August 2011. www.cbs.gov.il/shnaton62/st14_02x.pdf.
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INTRODUCTION 11
pursued a Stabilisation Programme with an over-arching goal of smaller government through privatisation, savings in public spending, lower tax burdens and debt reduction. As a result, expenditures have decreased to around 42% of GDP in 2010-11. The government strongly supports research and development activities. The main research and development projects are in information, communication, medicine, bio and nano technologies. Budget deficits peaked in 2001-03. The economic boom from 2004-08 resulted in rapid growth in tax revenues leading to cuts to corporate and personal income tax rates. In recent years, with the aim of having a responsible fiscal policy, the tax cuts were stopped and even partially reversed. 16. The main trading partners of Israel are the United States as a destination of over 24% of Israeli export (excluding diamonds) and the EU with over 30% (excluding diamonds). With regard to imports, the main trading partner is the EU (35% excluding diamonds). Other important trading partners 6 are: China, India, Japan and Brazil. 17. In 2010, Israel formally acceded to the OECD. Israel is also a member of World Trade Organization, International Monetary Fund and the United Nations. Israel is a member of the Global Forum on Transparency and Exchange of Information for Tax Purposes and is committed to implement the international standards for transparency and exchange of information for tax purposes.
General information on legal system and the taxation system Legal system
18. Israel is a parliamentary democratic republic with a multi-party system. Israels highest legislative body is the 120-seat unicameral Parliament (Knesset). Knesset members are elected for a four year term based on the share of total national vote in general elections. The Israeli head of state is the President, elected by the Knesset for a seven year term. Most executive power lies with the Government which is accountable to the Knesset. The Prime Minister, who is the head of government, is appointed by the President on the basis of the general election results. The Prime Minister is responsible for proposing a list of ministers, which is submitted within 28 days to the Knesset for approval. 19. The State of Israel is subdivided into six main administrative districts (known as mehozot): Center, Haifa, Jerusalem, North, Southern, and Tel Aviv Districts. Districts are further divided into fifteen sub-districts (known as nafot), which are themselves partitioned into fifty natural regions. Israels
6. www.cbs.gov.il/reader/newhodaot/hodaa_template_eng.html?hodaa=201216012.
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12 INTRODUCTION
largest and most populated district is Jerusalem. Districts have a certain degree of administrative autonomy however; most of the state policies including levying taxes are centralised in the hands of the Israeli government. 20. Israels legal system is strongly influenced by the common law tradition. Israel has no formal constitution. Upon attaining statehood, Israel took over statutes in force during the British mandate, insofar as they were not opposed to the provisions of the Declaration of the Establishment of the State of Israel. The main principles of the states power and its functioning are stipulated in number of Basic Laws. Laws are passed by the Knesset. The Government (typically ministers) can issue secondary legislation to implement laws within the limits laid down by the law. In some cases, laws can be conditioned on the adoption of secondary legislation by approval in a Knesset committee or require consultation with other ministers. Laws and secondary legislation come into force on their promulgation. 21. Israels judicial branch consists of three levels of courts: Magistrates Courts, District Courts and the Supreme Court, which operates also as the High Court of Justice. Civil tax cases are heard by the District Courts and indictments are submitted to the Magistrates Courts. Supreme Court can overrule decision of the District Court based on appeal by the taxpayer or the tax authority. Supervision of the activities of government and other public institutions is also carried out by the State Comptroller.
Taxation system
22. The Israeli taxation system is mainly based on indirect taxation of goods and services and income taxes. Total tax revenue as percentage of GDP was 32.4 % in 2010, which is about the average percentage among the OECD members. The total tax revenue in 2010 was NIS 240 billion (EUR 49.52 billion), out of which taxation of goods and services represented 39%, income taxes 30% and social security contributions 17%. 7 A gradual reduction of tax rates for individuals and companies has been implemented over the past decade. 23. Income tax is levied according to the Israeli Income Tax Ordinance, 5721-1961 (ITO). The ITO contains rules for corporate income tax, individual income tax as well as for the administrative aspects of taxation. Based on the Trachtenberg committee recommendation, ITO amendments were approved in December 2011, which repealed the earlier reduction in tax rates and set higher tax rates for tax year 2012 and later.
7.
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INTRODUCTION 13
24. As of 2012, corporations in Israel are subject to a tax rate of 25%. Individuals are subject to progressive personal income tax rates ranging from 10% to 48%. Special rules apply among others with regard to passive source income, rental fees, persons aged over 60, new immigrants and returning residents. Personal and corporate income taxes are levied on the worldwide income of individuals or companies who are Israeli tax residents. Non-residents are taxed on Israeli-source income. An individual is an Israeli tax resident if centre of life of that person is located in Israel (s. 1(a) ITO). A company is considered as Israeli tax resident if it is incorporated in Israel or it is managed and controlled from Israel 8 (s. 1(b) ITO). 25. Income earned abroad or derived from assets abroad by a new immigrant and a veteran returning resident is exempt from taxes for ten years after the date on which they become resident in Israel. Foreign companies that are managed and controlled in Israel are not considered resident for tax purposes for a period of ten years if they are managed and controlled by new immigrants or veteran returning residents who have spent at least ten consecutive years abroad as a foreign resident. Foreign residents are liable to tax on income generated or derived in Israel, subject to source rules and the respective double taxation treaties. Permanent establishments of foreign companies are generally taxed on Israeli-source income only. The Israeli income tax system includes special rules with regard to foreign professional companies, controlled foreign companies and foreign occupational companies enabling Israel to tax foreign source income in Israel under the defined circumstances. Israel also applies transfer pricing and participation exemption rules. Capital gains, defined as the excess of proceeds from the sale of an asset over its depreciated cost, are taxed at the rate of 25% or 30% based on ownership interest holding with respect to individuals and at the standard income tax rate of 25% with respect to companies. There is no gift tax or inheritance tax in Israel. 26. Companies are required to inform the tax authorities when they start operating and must submit annual tax returns. Upon the formation of a company registered in Israel, the company is required to open a tax file with the tax authorities and file Form 4436 accompanied by its articles of association. 27. The government levies a 15.5% value-added tax (VAT). The VAT rate in Israel is uniform for all taxable transactions. However, exported goods, sale of intangible assets to non-residents, in certain instances sale of goods to licensed warehouses, certain services rendered to non-residents, cross border transport services are among others not subject to VAT. Financial institutions are subject to profit tax instead of VAT at the same rate as VAT. Generally,
8. Based on the prevailing interpretation, this term should be understood in light of the analogous notion of place of effective management.
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14 INTRODUCTION
anyone who operates any business activity in Israel must be registered with the local tax administration for VAT purposes. However, there are exceptions from registration for persons whose main income arise from certain services (such as lectures, artistic performances etc.), in these cases the payment obligation transfers to the recipient. There are cases of exempt dealers, in which the dealer will have to be registered yet will not be obligated to issue tax invoices. (A VAT exempt dealer is defined as one having a transaction turnover less than NIS 76 884 [EUR 15 920] per year.) 28. Employers and employees are subject to national insurance (social security) and pension contribution. The employees share of national insurance also includes compulsory health insurance. Employees contribution to national insurance is applied at rates from 3.5% to 12%, employers rates are from 3.85% to 5.43%. In both cases the applied rate is based on the amount of individuals income which is subject to the insurance. Total pension contribution rate including employees and employers part is 10%. 29. The government further levies real estate taxes (acquisition tax between 0% to 5% for first apartment and 5% to 7% for a second apartment; betterment levy and land betterment levy at 48% until 7 November 2011 and at 25% after 1 January 2012 and at 20% during intermediate period; customs duties; purchase tax and municipal taxes on real estate. The customs duties rates vary between 0% to 100% on agriculture products, and between 0% and 12 % on industrial products.
Overview of commercial laws and other relevant factors for exchange of information
30. Private and public companies are principally governed by the Israeli Companies Law, 5759-1999. The courts have made a significant contribution to the development of Israeli law by means of judicial interpretation. In their decisions, the courts, to some extent, have been influenced by continental law, although English and American law also has persuasive force. It should be noted that before the Companies Law came into effect, the normative framework was based on the Companies Ordinance, 5743-1983, and much of it has not been repealed upon the coming into effect of the Companies Law, and remains in force even now. 31. The Companies Registrar is part of the Corporations Authority in Israel, which is an administrative body reporting to the Ministry of Justice. The Companies Registrar is in charge of maintaining the Israeli Register of Companies, in accordance with the requirements of the Companies Law and regulations. 32. Partnerships are regulated by Israels Partnership Ordinance, 1975. A partnership can be a general partnership or limited partnership. Trusts
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INTRODUCTION 15
are a type of non-corporate entity and their legal regulation is contained in the Trust law, 5739-1979. Israels law does not recognise the concept of a foundation. 33. The main relevant tax rules are stipulated by the Income Tax Ordinance, 5721-1961 and the Income tax regulation (returns and supplementary returns by body of persons, Regulation No. 5724-1963) prescribe its detailed application. Tax laws are enforced by state tax authorities that administratively report to the Ministry of Finance. Accounting obligations follow from Income Tax Ordinance and corresponding Income Tax Rules, 5733-1973. AML/CFT rules are contained in the Prohibition on Money Laundering Law, 5760-2000 (PMLL) and the Prohibition on Terror Financing Law, 2005 (PTFL). Israels AML obligations apply to banking corporations, members of stock exchange, portfolio managers, currency service providers, insurers and insurance agents, the postal company and provident funds (pension business). A number of ordinances stipulating detailed rules for AML procedures and obligations have been issued for all of the above mentioned entities 9. The Mutual Evaluation of Israel with regard to its compliance with the AML /CFT obligations is carried out by MONEYVAL 10. 34. Israels banking system is small and basically locally owned. In August 2012 11, the banking system in Israel consists of 15 ordinary banking corporations, 5 foreign banks, 2 mortgage banks, 1 financial institution and 2 joint service companies. The banking system in Israel is highly concentrated, with five of the largest banking groups (Bank Hapoalim, Bank Leumi, Discount Bank, Mizrahi Bank and First International Bank of Israel) controlling 94.7 per cent of all bank assets, and the three largest among them
9. These ordinances are: Prohibition of Money Laundering (Obligations of Stock Exchange Members to identify, report and retain lists for the purpose of preventing money laundering and financing terrorism), 5770-2010; Prohibition on Money Laundering (The Banking Corporations Requirement regarding Identification, Reporting, and Record-Keeping for the Prevention of Money Laundering and the Financing of Terrorism) Order, 57612001; Order on Prohibition on Money Laundering (Obligations of Identification, Reporting and Keeping Records of the Postal Bank to Prevent Money Laundering and Financing Terrorism), 57712011; Prohibition on Money Laundering Regulations (Rules for Use of Information Transferred to the Israel Police Force and the General Security Service for Investigation of Other Offenses and for Transferring it to Another Authority), 57662006. Third Evaluation Round Report (adopted on 9 July 2008) and Second Progress Report (adopted on 14 December 2011) can be seen at the MONEYVAL website: www.coe.int/t/dghl/monitoring/moneyval/Countries/Israel_en.asp. www.boi.org.il/en/BankingSupervision/Data/Pages/bankcoLists/list11.aspx.
10. 11.
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16 INTRODUCTION
accounting for over 77.3 per cent 12. A full range of banking services, including private banking, is offered by the banks. The Bank of Israel (Central Bank) is responsible for the supervision of the banking corporations. Its Licenses Committee approves the issuing of licenses to establish or purchase a controlling interest in a banking corporation, as well as approval for establishing a branch. The postal bank is owned by the government and has about 650 branches. It is supervised by the Ministry of Communication. 35. The Tel-Aviv Stock Exchange (TASE) is the only stock exchange operating in Israel. It is supervised by the Israel Securities Authority and offers various products for investors, including the trading of shares, corporate bonds, treasury bills and bonds, index-tracking products and derivatives on shares, indices and currency exchange rates. It provides clearing, settlement and depository services. TASE is the home market for Israeli companies, however, companies trading in the USA and on the London Stock Exchange can dual-list their shares on the TASE. At present, 552 equity companies are listed on the TASE, out of which 43 companies are cross-listed abroad.
Recent developments
36. An amendment to the Income Tax Ordinance enabling Israel to conclude international agreements solely for the purpose of exchange of information and clarifying Israels tax authority information gathering powers in respect of exchange of information is currently under legislative procedure. 37. A draft bill concerning the application of AML/CFT obligations on DNFBPs such as lawyers, that often provide trust services was approved by the Committee for Legislation and Law Enforcement on the 20th November of 2011 and is awaiting approval by the legislative power to become law. 38. On 19 May 2013 the Israeli Government has taken a decision to eliminate the exemption from filing tax returns by new immigrants and veteran returning residents and this decision is subjected to the further legislation procedure. The obligations will apply to new arrivals to Israel from the date the law comes into force.
12.
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A. Availability of Information
Overview
39. Effective exchange of information requires the availability of reliable information. In particular, it requires information on the identity of owners and other stakeholders as well as information on the transactions carried out by entities and other organisational structures. Such information may be kept for tax, regulatory, commercial or other reasons. If such information is not kept or the information is not maintained for a reasonable period of time, a jurisdictions competent authority may not be able to obtain and provide it when requested. This section of the report describes and assesses Israels legal and regulatory framework on availability of information. 40. Availability of ownership and identity information in respect of companies is generally ensured by the requirement to keep an up to date register of members. However, companies other than those listed on the stock exchange may issue bearer shares and no requirements exist to identify the owners of such shares. As on June 2013 only 12 out of a total of 325 694 companies incorporated in Israel are reported to have issued bearer shares. Ownership information in respect of foreign companies that are managed and controlled in Israel by new immigrants or veteran returning residents is not fully ensured as they are tax exempt for 10 years. Recommendations have been made in respect of these deficiencies. 41. Partnerships must be registered with the authorities and details of each partner must be furnished upon registration. Any change in this respect
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a prospectus as defined in the Securities Law, and are held by the public. Private Companies: these companies are companies that are not public companies.
47. Any person can establish a company, provided that none of the purposes of the company is illegal, immoral or contrary to public policy (s. 2 CL). A company can have a single shareholder (s. 3 CL). There are no limitations on the number of shareholders in either private or public companies. Every security in a company is presumed to be transferable (s. 293 CL), unless contrary provisions are laid down the articles of association (s. 294 CL). The rules described below on the availability of ownership information apply to all companies, unless indicated otherwise. 48. All companies are required to have a registered office in Israel (s. 123(a) CL). Any change of address of the registered office must be notified to the Registrar of Companies (Registrar) within 14 days of the change (s. 123(b) CL). Non-compliance with these provisions can lead to a fine of NIS 6 000 (EUR 1 200) (ss. 140(3), 145(2) and 354(a) CL).
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53. Public companies must report certain information to the Registrar as well, but this does not include ownership information (s. 142 CL). However, ownership information is available through the register of shareholders (s. 127). 54. Non-compliance with yearly reporting by companies can lead to a fine of NIS 6 000 (EUR 1200) (s. 354(a) CL).
Tax law
55. The Income Tax Ordinance (ITO) establishes that residents in Israel are obliged to pay income tax on their worldwide income for each tax year (s. 2 ITO). The ITO defines a company as a company incorporated or registered under any law in effect in Israel or elsewhere, including a cooperative society (s. 1 ITO). Companies are resident in Israel for tax purposes if they are incorporated in Israel or when they are managed and controlled in Israel (s. 1(b) ITO). 56. The ITO determines that companies are required to register no later than they start to operate (s. 134 ITO). Upon the formation of a company registered in Israel, the company is required to open a tax file with the Israel Tax Authority by filing Form 4436 titled Opening Corporation Tax File with the Israel Tax Authority accompanied by the articles of association in accordance with the tax authorities powers to demand the submission of returns (s. 135 ITO). Form 4436 must include the details of the directors and shareholders of the company such as: name and registration number, address, assessing office, type and amount of shares, holding percentage of shares by the shareholders and whether the shareholder is a director of the company. 57. Companies are required to file an annual tax return (s. 131(a)(5)). The Minister of Finance may, by regulations, prescribe additional returns for a company obliged to file an income tax return (s. 131A ITO). Companies must also file an annual report in Form 1214 reporting its current shareholders. This ensures availability of information on current shareholders annually. Non-filing of these returns attracts sanctions under the ITO (see section A.1.6 below). 58. The ITO obliges all persons 13 to notify the assessing officer about the beginning or change of occupation in time. The defaults of failure to inform the Assessing Officer of this fact in time and also non submission of their first annual tax return after the event are liable to three years of imprisonment or to a fine of NIS 75 300 (EUR 15 100) and to another fine of half the tax to which it was liable (s. 215A(a) ITO).
13.
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PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK ISRAEL OECD 2013
Foreign companies
62. Foreign companies are considered to be resident for tax purposes in Israel if they are managed and controlled from Israel (s. 1(b)(2) ITO), and are therefore subject to income tax in respect of their worldwide income (s. 2 ITO). Foreign companies are obliged to submit an annual tax return under section 131(a)(5) of the ITO if they are resident in Israel for tax purposes. The Minister of Finance may, by regulations, prescribe additional returns which a company is required to make which shall be attached to the income tax return (s. 131A ITO). Foreign companies which are resident in Israel for tax purposes must attach Form 1214 which contains a report of current shareholders. Foreign companies resident in Israel are also subject to the same penalties as domestic resident companies (see above). A total of 2564 foreign companies are registered in the register of Israeli Corporation Authority. 63. From 2007, foreign companies that are managed and controlled in Israel are not considered resident for tax purposes for a period of ten years if they are managed and controlled by new immigrants or veteran returning residents who have spent at least ten consecutive years abroad as a foreign resident (s. 1(b)(2) ITO). However, as part of a tentative regulation applicable for the years 2007-09 only, the requirement of 10 years consecutive stay abroad was reduced to five years. The tax exemption only applies to income generated outside Israel, however, income earned by these companies from any operation carried on in Israel, including management activities, is taxable. There is no requirement to file tax returns for such companies if they have no Israeli-source income. In the absence of a compulsory requirement to file tax returns by these foreign companies, information on the shareholders of these companies may not be available to Israeli authorities. The Israeli authorities have advised that number of persons managing a foreign company from Israel is uncertain. It is worth noting that only new immigrants and veteran returning residents who came to Israel from 2007 and onwards are eligible to the tax exemption. Since 2007, 92 484 new immigrants have come to Israel. A total of 13 188 veteran returning residents, who are eligible to claim the benefits, arrived in Israel between 2010 and 2012. The information on veteran returning residents for the period of 2007 and 2009 is not available. Israeli authorities advise that such persons are about 20 000. 64. A foreign company which keeps a place of business in Israel, including an office for the transfer of shares or for the registration of shares, must be registered as a foreign company (s. 346(a) CL). The application for registration has to be submitted to the Registrar within one month of setting up a place of business and it must attach the following documents: (a) a copy of the documents under which the company is incorporated or pursuant to which it operates, including its articles of association; (b) a list of the directors of
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Nominees
67. Section 131 of the Company Law provides that a shareholder who is a trustee must be registered on the register of shareholders, with a reference to the trusteeship, and such a person is considered as a shareholder for the purpose of the Company Law. Section 176 of the Company Law establishes that a person in whose name the shares are registered in a private company is the shareholder of the company. Therefore, nominee shareholder is treated as a legal owner of shares in case of a private company. Israeli authorities have advised that nominee shareholders are treated as trustees in Israel and provisions of the Trust Law 5739-1979 of 1980 apply in the matter and trustees must hold information on the persons on whose behalf they hold shares. Israel has further clarified that the definition of trustee and trust under the Income Tax Ordinance is very broad and refer to any kind of relationship in which one person hold assets on behalf of another person no matter how that relationship is classified under Israeli or any other law. Therefore, nominee shareholders are treated as trustees under the provisions of the ITO too. The provisions concerning trusts in Israel are discussed further below in the report.
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68. The provisions with regard to ownership of the shares held by a nominee in a public company are different. When a companys shares are listed for trading on a stock exchange in Israel, a nominee company may be entered on the register of shareholders, in addition to the information as required in section 130 (a)(1) (s. 132 CL). Section 130 (a)(1) requires information on the name, identity number and address of the shareholder. Further, the nominee company is not considered as a shareholder in the company and the shares entered under its name are considered owned by a person for whose benefit such shares are registered (ss. 132 and 177). Therefore, in case of a company whose shares are listed on stock exchange and shares are held by a nominee, the information on nominee as well as the person on whose behalf such shares are held by such a nominee must be available in the register of shareholders.
Conclusion
69. All companies are required to keep a register of shareholders. Public companies also need to keep a register of substantial shareholders in addition to the register of shareholders. In addition, the Registrar of Companies keeps a register of all companies and the information available includes ownership information for private companies. The Israeli tax authorities also maintain ownership information on all companies that are resident for tax purposes in Israel (including companies formed in Israel and foreign companies that are managed and controlled in Israel), since these companies are required to update shareholder information each year when they file their tax return. However, a gap remains with regards to foreign companies which are managed and controlled in Israel by new immigrants or veteran returning residents subject to a ten year tax exemption. There are no impediments for a person to act as a nominee shareholder for another person and the availability of information on the nominees as well as the persons on whose behalf they hold shares is ensured in Israel.
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74. Israeli authorities have confirmed that issuing securities and offering the option to sell them to public require a formal approval from the Minister of Finance or his authorised representative. They have further confirmed that there are at present no listed bearer shares in Israel Stock Market, and no bearer shares are being traded, except one company with six bearer shares which are not traded. In view of the specific requirements that for seeking a registration of securities with the Stock Exchange such securities must be listed in the companys stock register ensures that a public company registered on the stock exchange is not allowed to have its shares in bearer form. It is clear that no public company of which shares are in bearer form can register with the Stock Exchange. 75. Companies are required to file an annual report to the Register of Companies. In this annual report the companies must provide information on the capital of the company; authorised and allotted capital; and types and numbers of shares issued. In respect of registered shares, information on the identification of shareholders must also be provided. In respect of bearer
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shares information on the number of warrants issued and number of shares in each warrant is required to be stated but information on the identity of holders is not required. Israeli authorities have advised that 12 companies out of 325 694 companies incorporated in Israel are reported to have issued bearer shares as on June 2013. Based on this information, the authorities report that the use of bearer shares in Israel is negligible. Public companies registered on the stock exchange are not allowed to have bearer shares. The mechanisms to ensure availability of information on the owners of bearer shares issued by other companies are not in place, therefore, it is recommended that Israel establishes suitable legal mechanisms that ensure availability of information on owners of bearer shares in all circumstances.
77. General and limited partnerships must be registered within one month from the date of formation (s. 4 PO). If a partnership does not register as required by law, then each of its partners is liable to a fine of NIS 15 (EUR 3) for each day on which the offense continues; however, non-registration of a partnership shall not affect the consideration of whether or not the partnership exists (s. 6 PO). 78. Section 7 of the PO establishes that the registration of a general or limited partnership shall be effected by sending a notice to the Registrar, signed by the partners, which must include the following details: (a) the name of the partnership; (b) the general nature of the business;
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14.
The last date an exchange rate between Italian Liras and New Israeli Shekels was published was on the 25 January 2002: ITA 1 000 = NIS 2.075. Source Israeli National Bank.
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(f) the name and address of the Israeli citizen authorised to receive legal documents and notifications on behalf of the partnership; and (g) regarding a limited partnership, also a notice that the partnership is a limited one, and the details of each limited partner, the sum inserted by him and if paid in cash or any other way, and if paid in full. 82. In the case of changes in the registration details of a foreign partnership, a notice, signed by all the partners, in which such change shall be specified, must be sent to the Registrar within fourteen days (s. 78 PO). The registration requirement and the obligation to submit any change ensure the availability of ownership information in respect of all foreign partnerships doing business in Israel. Any person failing to submit a notice to the Registrar of a change in any of the details of registration is liable to a fine of NIS 15 for each day on which the offence continues (s. 78 PO).
Tax law
83. Under the Income Tax Ordinance two or more persons carrying on business or vocation jointly are taxed as partnerships. These tax provisions equally apply to foreign partnerships carrying on business in Israel. Partnerships are considered transparent for tax purposes, which mean that the partners are taxed separately for their share in the partnerships income (s. 63(a)(1) ITO). Nonetheless, partnerships are obliged to register with the tax authorities no later than on the date they start operating by filing Form 4436 (s. 134 ITO) and one of the partners resident in Israel of the partnership at the request of the assessing officer must make and deliver a return of the partnerships income for every year (s. 63(2) ITO). The return must contain the names and addresses of the other partners together with the amount of the share of the income to which each partner was entitled (s. 63(2) ITO). Where there is no partner resident in Israel, the return must be filed by a representative (e.g. attorney) of the partnership who is resident in Israel upon the request of the tax authorities (s. 63(2) ITO). This means that where a partnership return has been submitted, full ownership information for the relevant year is available with the tax authorities.
Conclusion
84. All partnerships organised in Israel or carrying on a business in Israel must be registered and upon registration details of all partners must be submitted. Any changes must be notified within 7 days in the case of domestic partnerships and 14 days in the case of foreign partnerships. Updated ownership information on partnerships must therefore be available with the registration authorities. In addition, the tax authorities may request that a tax return for a partnership be made including ownership information on all partners.
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PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK ISRAEL OECD 2013
88. If the trust is intended to be executed during the life of the settlor, it must be signed before a notary (s. 17(1) TL). The signing of a document before a notary requires that the person appears before the notary and is identified (Art. 12 Notaries Law 5732-1972). Notaries are licensed in Israel and must not exercise their powers in respect of a document that is not duly stamped (Art. 18 Notaries Law). A notary must also retain a copy of the document in respect of which he or she acts and send it to the central archive for notarial documents at the time prescribed in regulations (Arts. 19, 31 Notaries Law). If it is intended to be executed after the death of the settlor, it must be set out as a testament (s. 17(2) TL) or in the form of a payment order according to section 147 of the Succession Law. Where any property is de facto a private trust but no instrument of trust exists in respect thereof, the court may declare the existence of a trust and may determine its objects, property conditions and the date of commencement (s. 17 TL). Public trusts, of which one of the purposes is to advance public interest, must register with the Registrar of Endowments and also furnish an annual report (s. 26 TL). The Registrar of Trusts keeps a computerised registry of trusts which is open to public subject to the limitations of privacy protection. These trusts are also obliged to furnish annual financial statements to the Registrar. Information on the founders, the trust conditions and trustees of public trusts is available with the Registrar. Private trusts including endowments are not obliged to register with the Registrar. 89. It is conceivable that a trust could be created which has no connection with Israel other than that the settlor chooses the trust to be governed by Israeli law. In that event, there may be no information about the trust available in Israel. In these situations, trust information would have to be available in the jurisdiction where the trustee is located as the relevant records would be situated there.
Foreign Trusts
90. Foreign trusts are not addressed in the Trust Law, so identity information in relation to foreign trusts that have a nexus to Israel would not be available under the provisions of the Trust Law. Israeli law does not prohibit a resident from acting as a trustee or trust administrator for a foreign trust. Israel is not a Party to the Hague Convention on the Law Applicable to Trusts. However, information in respect of such trusts is ensured, with some exceptions, due to the provisions of Israelis Income Tax Ordinance discussed below.
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Tax Obligations
91. The Income Tax Ordinance prescribes comprehensive rules with regard to taxation and reporting requirements for trusts governed under Israeli law or foreign law. These rules came into effect on 1 January 2006, however, reporting obligations have been in force since 31 August 2008. Under the taxation rules, it is immaterial that trustees are resident in Israel or not or assets are located within or out of Israel. The ITO classifies trusts into following categories for taxation purposes: Israeli resident trusts (s. 75G): at the time of creation at least one settlor and at least one beneficiary were Israeli residents, and in the tax year at least one settlor and at least one beneficiary are residents in Israel; further a trust that is not created by foreign residents and is not a foreign resident beneficiary trust is regarded as an Israeli resident trust. The assets and income of an Israeli resident trust are considered as assets and income of the settlor(s). This trust is taxable in Israel. Foreign resident settlor trusts (s. 75I); a trust of which all settlors were foreign residents when created and also in the tax year or during the tax year all settlors and beneficiaries are foreign residents. This trust is exempt from tax in Israel. The assets held by trustee are deemed as owned by the settlor personally. Foreign resident beneficiary trusts (s. 75J): a trust settled by an Israeli resident in favour of non-Israeli beneficiaries. These trusts are not subject to tax in Israel subject to certain conditions including that all beneficiaries are non-Israeli residents and their identity is known. Assets and income of the trust are deemed to be the assets and income of the beneficiaries. Testamentary trust (s. 75L); a trust created under a Will and where all the settlors of the trust are Testators who were residents in Israel at the time of their demise. Assets and income are deemed to belong to the beneficiaries and taxability depends on their residence. A trusteeship created by a Will, in which at least one of the beneficiaries is a resident of Israel, is considered as an Israeli resident trust and provisions of Section 75 G apply.
Tax returns
92. Section 131 (a) (5b) of the ITO provides for the filing of tax returns in respect of a trusteeship. A trustee is obliged to file a tax return of an Israeli resident trust (Form 1327: annual return of a trustee of trusteeship) to the assessing officer of the trust. A trustee must also file a tax return of any trust that has income or assets in Israel. A beneficiary or a settlor who elects to be
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assessable and chargeable to the trust income must also file a tax return of the trust. A trustee of a foreign resident beneficiary trust is required to file a tax return only if the trust has income or assets in Israel. A testamentary trust which has no Israel resident beneficiary is not compulsorily required to file a return and provisions of a foreign resident beneficiary trusteeship apply. 93. The tax return of a trust must contain, among other things, particulars of all settlors, trustees, protectors and beneficiaries and the residential status of each (s. 131 ITO)). These details are required to be submitted in Form 151 H, as an annexure to the annual tax return. Trusts are given a trust file number by the assessing (tax) officer in Israel. Any change in the type of trust or the termination of the trust is also notified through Form 151H. If the reporting trustee is a foreign resident then a mailing address in Israel must be provided. In the case of a foreign resident settlor trust or a foreign resident beneficiary trust, Form 151H must be filed to provide details of vesting and distributions of assets and income in Israel, however, such a form is only required to be filed if these trusts have assets or income in Israel. 94. Section 75 O (e) provides exemption from filing of tax returns under section 131 in respect of income created or accrued abroad by a trusteeship created by foreign residents or by a foreign resident beneficiary trusts or by a trusteeship created under a will in which there is no Israel resident beneficiary. This exemption from filing tax returns to trustees including an Israeli resident applies in respect of foreign sourced income earned by these trusts even if they file tax return about income produced or accrued in Israel. Section 75P (c) provides that, the fact that a trustee is an Israeli resident does not create a tax liability or an obligation to submit a return in respect of trust income, in addition to the obligations specified in the ITO, such as would not exist if all the trustees were foreign residents.
Reporting obligations
95. Section 75 P1 of the ITO obliges an Israeli resident settlor to give a notice in Form 147 within 90 days of the creation of a trust or contribution of assets to a trust to the assessing officer of the trust and a copy to the tax officer where the settlors tax file is maintained. The form contains details like name of trust; date of creation of trust; details of each of the trust protectors, trustees, beneficiaries, settlors and contributions to the trust. Information on individuals includes name, identifying number and country of residence. An individuals identifying number is associated with information that identifies the person. However, this obligation does not apply to an Israeli resident settlor who became an Israeli resident for the first time or a veteran returning resident for a period of 10 years from the date on which he/she became an Israeli resident on the condition that only assets abroad or income from assets abroad are vested in such a trusteeship (s. 75P1(a1)).
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Conclusion
100. Tax return filing requirements apply to the Israeli resident trusts and all types of trusts that have income or assets in Israel. Information on the settlors, trustees and beneficiaries must also be filed in a separate form attached to the tax return. Tax reporting requirements apply to all beneficiaries and settlors resident in Israel except for new immigrants and veteran returning residents. Further, a reporting trustee of a foreign resident beneficiary trust must submit information on the trust, even if no tax return is required to be submitted. There is no tax filing or reporting requirements in case of foreign resident settlor trusts that have no assets or income in Israel. The tax law exempts the Israeli settlor of trusts who are new immigrants or veteran returning residents from reporting obligations for the first ten years if such a trust has no income or assets in Israel. Therefore, it is recommended that Israel sufficiently ensure the availability of identity information in respect of the settlors, trustees and beneficiaries of the foreign resident settlor trusts and for trusts created by the new immigrants and veteran returning residents which are vested with assets or income from assets abroad.
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PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK ISRAEL OECD 2013
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK ISRAEL OECD 2013
Israel should ensure that ownership information is available to its competent authority in respect of all foreign companies that are managed and controlled from Israel.
Israel should ensure the availability of identity information in respect of the settlors, trustees and beneficiaries of foreign resident settlor trusts having a trustee resident in Israel and for trusts created by new immigrants and veteran returning residents which are vested with assets or income from assets abroad.
111. A condition for exchange of information for tax purposes to be effective is that reliable information, foreseeably relevant to the tax requirements of
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PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK ISRAEL OECD 2013
years (s. 3 SR). The financial statements of a company issuing securities in a foreign country may be prepared in accordance with international accounting standards or accepted accounting rules in the United States (s. 3A SR). The assets of the corporation should be classified and presented in the following categories: (i) current assets; (ii) non-current inventory; (iii) investments, loans and long-term debit balances; (iv) fixed assets; and other assets, including intangible assets and deferred expenses (s. 12 SR). Public companies are also obliged to report the details of their investments in controlled companies which should be classified in: (i) shares; (ii) certificates that grant a right to purchase shares; (iii) certificates of indebtedness that can be converted into shares; (iv) certificates of indebtedness that cannot be converted into shares; and (iv) loans and debit balances that are not included in the current assets (s. 22 SR). 115. Public companies are also required to report information on their share capital which should include the number, class, nominal value and main rights (s. 40 SR). The SR also includes an obligation on reporting taxes on income on the current year and previous years (s. 57 SR). With regards to ownership information of a public company, public companies must submit information on their liabilities to their principal shareholder; their investments in a principal shareholder; and the benefits to a principal shareholder and transactions with him (ss. 62, 63 and 64 SR). The accounting records kept by public companies must correctly explain all the transactions of the company, enable the financial position of the company to be determined accurately at any time and allow financial statements to be prepared. 116. The SR defines the international auditing standards as the standards published by the International Federation of Accountants (IFAC) (s. 1 SR). The International Auditing Standard on Auditing (IASA) 200 require financial statements to be a structured representation of the financial information, which ordinarily includes accompanying notes, derived from accounting records and intended to communicate an entitys economic resources or obligations at a point in time or the changes therein for a period of time in accordance with a financial reporting framework (p. 34 IASA). The International Financial Reporting Standards (IFRS) published by the IFAC require financial statements to provide information about the financial position, performance and cash flows of an entity. The IFRS require financial statements to include a balance sheet; an income statement; a statement of changes in equity; a cash flow statement; and notes, comprising a summary of significant accounting policies and other explanatory notes. Taking into account the requirement that the accounts must be audited under Israeli law, it may be expected that the records to be kept (i) correctly explain all transactions, (ii) enable the financial position of the entity or arrangement to be determined with reasonable accuracy at any time, and (iii) allow financial statements to be prepared.
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PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK ISRAEL OECD 2013
account books by such companies, the availability of their accounting records in respect of activities outside of Israel is not ensured. 120. The Income Tax Regulations (Returns and Supplementary Returns by Body of Persons) 5724-1963 require corporate entities to attach to their annual tax return (i) a balance sheet as of the last day of the tax year and a profit and loss account for the tax year, together with an auditors report; and (ii) an adjustment account of the profit and loss of the income or loss declared in the annual tax return. 121. Under the Income Tax Rules (Bookkeeping) 5733-1973 (ITR) a taxpayer must keep a set of account books in accordance with the provisions of the applicable Schedule depending on the type of business or profession carried on by him (s. 2 ITR). The ITR provides that all taxpayers to whom the provisions of the Schedules apply are obliged to have documentation that would include receipts, a daily intake ledger, cash register, delivery notes, invoices and an inventory list (sections 5 through 10 ITR). These taxpayers are also required to keep account books that should include a cash book (s. 11 ITR), intake and payments book (s. 12 ITR), stock book (s. 13 ITR), goods of entry book (s. 14 ITR) and an order book (s. 15 ITR). Account books required under Israeli tax law meet the international standard since they would enable taxpayers to correctly explain all the transactions they are engaged in, enable the financial position of the taxpayer be determined with reasonable accuracy at any time and allow financial statements to be prepared. 122. Persons who are tax residents but who are not covered by the obligation to keep books and records under section 130 ITO are nevertheless required to submit an income tax return if they receive income (s. 131 ITO). Section 131(b) of the ITO further requires filing of a copy of balance sheet and profit and loss account with the tax return, if the return is based on a complete set of double-entry accounts. In other cases, the basis of declaration of income must be stated. It is noted that companies, partnerships, trusts and associations are subject to obligations to keep books and records separately from tax law.
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PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK ISRAEL OECD 2013
producers, retailers, contractors, professionals, physicians and other types of taxpayers include a file of external documentation.
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127. The Banking (Licensing) Law (BL) determines that only banking corporations shall engage in: (i) acceptance of deposits of funds and issuance of credit as one activity and (ii) securities issuance that entails a prospectus under Section 15 of the Securities Law, 5728-1968, and issuance of credit as one activity (Section 21). In addition only banks or foreign banks, licensed by the Governor of the Central Bank, are allowed to engage in acceptance of deposits of funds in current accounts for payout from said deposits by cheque upon demand (Section 13 BL). Banks are allowed to engage only in banking business specified in Section 10 of the Banking Law (s. 3, s. 4 and s. 10 BL). The Bank of Israel is the regulatory and supervisory body for the Israeli banking industry. As at August 2012, a total of 22 banks were operating in Israel. The Postal Bank is Government owned and supervised by the Ministry of Communications.
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accordance with the aforementioned declaration (s. 2 PMLO). Failure to carry out CDD or to maintain the identification documentation for at least seven years after the end of relationship can lead to an administrative fine of no more than NIS 2 260 000 (EUR 452 000) for each default (s. 14(a) PMLL). 131. Even though financial institutions under section 18 of Directive 411 on the Prevention of Money Laundering and Terrorism Financing, and Customer Identification (Directive 411) may have numbered accounts (accounts in which the name of the beneficial owner is known by the banking corporation but is substituted by an account number or code name in some documentation) they must abide by the following rules: (a) numbered accounts shall be subject to customer due diligence procedures applicable to all accounts; (b) the identity of a customer with a numbered account shall be known to a sufficient number of officials to enable a thorough and adequate check of the customers identity and to monitor his transactions for purposes of identifying unusual activity; (c) numbered accounts shall not be used to hide a customers identity from the compliance or supervisory authorities; and (d) a banking corporation which takes special measures to ensure internal secrecy in regard to customers accounts shall ensure that the accounts of these customers are examined and monitored at least as thoroughly as accounts of customers regarding whom no such special measures are taken, and shall ensure that the officer responsible and the internal auditors shall have direct access to the information on these accounts. 132. Due to the legal requirements mentioned above, financial institutions cannot keep anonymous accounts or other types of accounts which are opened on behalf of another person which are not identified and known. 133. Section 7 of the PMLO requires banking corporations to retain identification documents or photocopies thereof for at least seven years after the account is closed or a transaction has been carried out. Banking corporations are obliged to retain the documents attesting to the instruction to the banking corporation to carry out a transaction for the same period in two cases: (a) when the transaction was reported to the Financial Intelligence Unit and (b) when the value of the transaction was equivalent to at least NIS 10 000 (EUR 2 000). This means that the instruction documents for transactions below this threshold may not be retained for at least seven years under the provisions of the PMLO. 134. The Proper Conduct of Banking Business Directive 411 determines that banking corporations must establish procedures for the retention of
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15. 16.
Council of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism. Council of Europe website: www.coe.int/t/dghl/monitoring/moneyval/countries/ Israel_en.asp.
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issued a Second Progress report 17 on 14 December 2011 which states that, it appears that the Israeli authorities have taken steps towards meeting the MONEYVAL recommendations, firstly by adopting the obligations to maintain documents on the instruction to carry out any transactions for a period of seven years for Stock Exchange Members and for Portfolio Managers, and secondly, by drafting new provisions on record keeping, applicable to banking corporations, Post Bank, insurers and insurance agents, provident funds and companies managing a provident fund business. However, the latest provisions are not in force yet and thresholds are still applicable. The Israeli authorities have advised that amendments to the PMLO with regard to record keeping irrespective of threshold are currently pending for discussion of the Knesset committee. The Company Law and the ITO oblige all relevant entities including banks to keep underlying documentation for at least five years, however, this obligation may not meet the requirements of the TOR A.3.
Determination and factors underlying recommendations
Phase 1 determination The element is in place, but certain aspects of the legal implementation of the element need improvement. Factors underlying recommendations The AML/CFT laws only require retention of documents attesting the instruction to carry out transactions above the threshold of NIS 10 000 (EUR 2 000) or reported as suspicious transaction to the FIU. Recommendations Israel should ensure that transactional information consistent with the standard is available in respect of all transactions carried out by the banks.
17.
www.coe.int/t/dghl/monitoring/moneyval/Evaluations/Progress%20reports%202y/ MONEYVAL(2011)28_ProgRep2_ISR_en.pdf.
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B. Access to Information
Overview
139. A variety of information may be needed in a tax enquiry and jurisdictions should have the authority to obtain all such information. This includes information held by banks and other financial institutions as well as information concerning the ownership of companies or the identity of interest holders in other persons or entities, such as partnerships and trusts, as well as accounting information in respect of all such entities. This section of the report examines whether Israels legal and regulatory framework gives the authorities access powers that cover the right types of persons and information and whether rights and safeguards would be compatible with effective exchange of information. 140. The Israeli tax administration has broad powers to access information relevant for the tasks of the tax administration from any person and from public authorities. The assessing officer may ask a person for delivery of his return including declaration of the capital and assets and for providing books documents, accounts and returns which the assessing officer deems necessary. The assessing officer is empowered to require relevant tax information also from third parties (e.g. suppliers, customers, payers of taxable income, employers). These information gathering powers include power to enter any place in which a business or a vocation is carried on, and examine and seize stock in trade, the cash box, machinery, books, accounts, vouchers, records and other documents deemed necessary. The assessing officer has also the power to summon any person who has business relations with the assessee and who he believes can testify on his income. Non-compliance can be sanctioned with administrative as well as criminal penalties. However, there are some limits on these powers in respect of information relating to new immigrants or returning veterans during a 10 year tax exempt period and in respect of foreign resident settlor trusts. 141. The Israeli authorities advise that usage of these broad information gathering powers for exchange of information purposes is based on
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Ownership and identity information (ToR B.1.1) and Accounting records (ToR B.1.2)
145. The tax administration is under a general duty to systematically ensure taxpayers and third parties compliance with obligations under the ITO and has necessary powers for that purpose. The administration is required and entitled to assess the correct tax liability of the taxpayer and in order to do so has broad powers enabling it to obtain complete information about persons income. This information can be gathered from broad variety of persons, sources and by variety of means (s. 135140A ITO).
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146. In order to obtain complete information about a persons income the tax administration via assessing officer has power to demand from that person by written notice delivery of his return specified in that notice, including a declaration of the capital and assets of that person or of his spouse and of their children for whom they are entitled to credit points or pension points, or of assets for which he serves as a trustee of another person. The Assessing Officer may also demand that the person appear before him, in person or by a representative, and that he deliver to him all the particulars required by the Assessing Officer in order to ascertain his income and that he produce for examination books, documents, accounts and returns which the Assessing Officer deems necessary (s. 135(1) ITO). 147. The Assessing Officer may enter any place in which a business or a vocation is carried on, and examine stock in trade, the cash box, machinery, books, accounts, vouchers, records and other documents that relate to that business or vocation and demand explanations in connection with them. The assessing officer can also seize books, accounts, vouchers, records and other documents that relate to that business or vocation, if he is convinced that it is necessary in order to ensure compliance with the provisions of the ITO or to prevent an evasion of compliance with those provisions. The assessing officer may summon any person who has business relations with the assessee and who he believes can testify on his income, to appear before him and demand of the said person that he give him documents that relate to that income (s. 135(2-4) ITO). 148. The Israeli tax administration has also the power to demand information about suppliers and customers from a person that owns a business or practices a vocation except for advocates, physicians and psychologists. Upon demand of the assessing officer he must provide to the officer information and documents about his business relations with his suppliers, customers or other persons with whom he has business relations, even though that information and those documents are not required to ascertain his income (s. 135A ITO). Israeli authorities advise that this obligation covers also banks and other financial institutions and prevails over any respective secrecy rules in respect of these entities stipulated in Israeli laws. 18 149. The Assessing Officer may demand a return of income from a person who receives profits or income to which ITO applies and which belong to a certain person, or which pays said profits or income to a certain person. This demand obliges the requested person to submit a return regardless the capacity in which he received or paid the respective income. This return must contain a true and correct disclosure of all those profits and income, and the name and address of that certain person (s. 137 ITO).
18. See section B.1.5.
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Use of information gathering measures absent domestic tax interest (ToR B.1.3)
153. The concept of domestic tax interest describes a situation where a contracting party can only provide information to another contracting party if it has an interest in the requested information for its own tax purposes. 154. The information gathering powers of Israels tax administration are stipulated under s. 135-140 of the ITO. The respective sections make reference to assessing officer, a person and an income. Section 1 of the ITO defines person to include a company and a body of persons as defined in the Ordinance. Company is defined as a company incorporated or registered in Israel or elsewhere. Income is defined as a persons total income from the sources specified in section 2 and together with amounts in respect of which
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any statute provides that they be treated as income for the purpose of the Ordinance (s. 1, ITO). 155. Israels tax administration has sufficiently broad access powers for domestic tax purposes. Their usage for exchange of information purposes is based on treaties and the way in which they have been given effect in Israels law. Provisions concerning double taxation relief are contained in Chapter III (sections 196 through 214) of the ITO. Section 196 in relation to the order that gives effect to agreement reads as: Order that gives effect to agreement 196. (a) When the Minister of Finance has given notice by Order, that an agreement specified in the Order was concluded with a certain state to afford double taxation relief on income tax and on every other tax of a similar character imposed by the Laws of that state (hereafter: reciprocating state) and that it is expedient to give that agreement effect in Israel, then that agreement (hereafter: agreement) shall have effect in relation to income tax, notwithstanding any provision of any statute. 156. Section 196 incorporates the international agreement into the ITO, including the relevant EOI article, so that the treaty has full effect in Israel in relation to income tax. Accordingly, the authorities have an obligation to give effect to the provisions of the exchange of information article in their tax treaties. As described above, the Israeli tax authorities have a number of different powers at their disposal for domestic tax purposes. The provisions themselves are not specifically drafted with exchange of information in mind, and their application for exchange purposes is clearer in some cases than in others. For example, sections 135(2) (4) empower the Assessing Officer, among other things, may enter any place in which a business or a vocation is carried on and examine any documents and demand explanations. There is no aspect of this provision that is specifically connected to the determination of Israeli tax. On the other hand, section 135 refers to requiring a person to submit a return or provide any information to the Assessing Officer in order to determine that persons income and it might be argued that this requires a domestic tax interest, although no issues have ever arisen in practice in this regard. Moreover, section 196 of the ITO only refers to double tax conventions and does not apply to TIEAs. Therefore, the Israeli Tax Authorities do not have the power to obtain and provide information for the purpose of responding to a request for information pursuant to a TIEA. 157. Accordingly, it is recommended that Israel clarifies in its laws that the information gathering powers under the Income Tax Ordinance can also be used for exchange of information purposes, pursuant to both a DTC or
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institutions (s. 135A ITO). The Supreme Court has acknowledged 19 that banking secrecy has a unique standing but it does not override disclosure obligation stipulated by the law. Therefore, there are no restrictions on the powers of the tax authorities to obtain information from the banks. 162. Assessing officer is authorised to apply to a bank institution and ask for information regarding accounts and assets which belong to specific clients. Consequently, banks and other financial institutions are required to provide the requested information to the tax administration.
Professional privileges
163. Section 235B of the Income Tax Ordinance empowers the Assessing Officer to obtain information from advocates. The advocates must deliver any document in his possession to the assessing officer, enable him to examine and seize any of the delivered documents and allow him to perform any other act in respect of the said document. The assessing officer is empowered to use all powers available to him under the ITO. These provisions of the ITO specifically override the provisions of Advocates Law 5721-1961. However, the advocate must not deliver the documents if he claims the document is privileged. A document that includes a professional secret is considered a privileged document (s. 235A). The advocate must deliver the document demanded by the assessing officer and if he claims that the document is privileged then the assessing officer must not inspect the document and the claim of the advocate is decided by the court in accordance with the procedure prescribed in sections 235C and 235D of the ITO. 164. Section 235A of the ITO defines professional secret as, communication between a client and an advocate, whether oral or written, which is substantially connected to the professional service rendered by the advocate to the client, including records prepared by the advocate for his own use, on condition that they are substantially connected to the said professional service. Professional service is limited to services provided in the advocates capacity as an advocate, and does not extend to services rendered in another capacity. 165. Members of the Israeli Bar Association, their staff members or representatives are obliged to maintain confidentiality on all the facts of which they have learnt in connection with provision of their legal services (s. 90 of the Bar Association Law, 1961). They can only be released from this obligation of maintaining confidentiality including for the purpose of judicial proceedings, by their clients declaration. However, the members of Bar Association or their representatives are still obliged to maintain confidentiality if it is in the clients interest (s. 19 of the Bar Association Rules (Professional Ethics), 1986).
19. LCA 1917/92 [1993] Scoler v. Jerabi, IsrSC 47(5) 764.
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Tax secrecy
166. Sections 231 to 235 of the ITO sets out secrecy provisions concerning the information obtained by Israel Tax Authority. Section 234 states that, if a person has possession or control of documents, information, returns, assessment lists or their copies, which relate to the income of a person or to a particular of his income, and if he at any time communicates or tries to communicate aforesaid information or any contents of those documents to a person to whom the Minister of Finance did not permit him to communicate it, or if he communicates it not for purposes of this Ordinance, then he shall be liable to six months imprisonment or to a fine. However, these secrecy provisions are specifically overridden for disclosing information to an authorised office of the reciprocating state with whom an agreement has been given effect as per provisions of section 196 (section 197 ITO).
Determination and factors underlying recommendations
Determination The element is in place, but certain aspects of the legal implementation of the element need improvement. Factors underlying recommendations Israels access powers for the purpose of exchange of information under international tax agreements are not provided for explicitly, in all cases, and are only applicable to requests made under double tax conventions. The tax authorities powers to obtain information from new immigrants, veteran returning residents and the trustees of foreign resident settlor trusts, having a trustee resident in Israel, in respect of foreign source income are inadequate. Recommendations Israel should ensure that its competent authority has the power to obtain all relevant information pursuant to requests under all exchange of information agreements (regardless of their form). Israel should ensure that its authorities have powers to obtain information from new immigrants, veteran returning residents and trustees of foreign resident settlor trusts which might be subject of an information request from its EOI partners.
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C. Exchanging Information
Overview
171. Jurisdictions generally cannot exchange information for tax purposes unless they have a legal basis or mechanism for doing so. In Israel, the legal authority to exchange information derives from double tax conventions as well as from domestic law. This section of the report examines whether Israel has a network of information exchange that would allow it to achieve effective exchange of information in practice. 172. In Israel, the legal authority to exchange information is derived from double tax conventions upon their signature by the Minister of Foreign Affairs and upon their ratification by the Knesset. DTCs are given effect by order of the Minister of Finance. International agreement prevails when in conflict with domestic legislation concerning issues covered by the international agreement in respect of income taxes including exchange of information. 173. Israel has a developed network of bilateral agreements that provide for exchange of information in tax matters. This network currently covers 54 jurisdictions through double tax conventions (DTCs). All DTCs are in force with the exception of DTCs with the Former Yugoslav Republic of Macedonia (FYROM), Malta and Panama. 174. Israels DTCs cover most of its major trading partners including almost all EU member states, 16 of the G20 members almost half of the Global Forum members and all, except for four, OECD members. Israel has an ongoing treaty negotiation program. In addition, Israel is currently updating its older agreements by establishing amendments to the DTC and Protocols to bring the exchange of information articles to the international standard. 175. Out of the 54 signed DTCs, five DTCs (Denmark, FYROM, Georgia, Malta and Panama) contain the full text of Article 26 of the OECD Model
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180. The DTCs signed by Israel are given effect by section 196 of the ITO. Based on the ITO, international treaties override any contradictory domestic laws concerning issues covered by the international agreement in respect of income taxes including exchange of information.
20. 21. DTCs with Germany, Jamaica, Luxembourg, the Netherlands, Singapore, South Africa, Switzerland and the United Kingdom. The agreements with the United Kingdom and with Sweden.
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181. Israel has signed 54 DTCs. All DTCs are in force with the exception of DTC with the FYROM, Malta and Panama. 182. Section 196 of the ITO does not allow Israel to conclude international agreements solely for the purpose of administrative assistance in tax matters. It is required that such agreements must also afford double taxation relief. As a consequence, Israel has not yet concluded any Tax information exchange agreement (TIEA) or any other instrument providing solely for the administrative assistance in tax matters.
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laws in one of the parties do not allow exchange of information in the scope of Article 26(5) of the OECD Model Tax Convention. 190. As stated in section B.1 of this report Israels domestic law does not contain restriction in respect of access to banking information. Nevertheless, for some of Israels partners which have domestic restrictions on access to information the absence of a provision akin to Article 26(5) of the OECD Model Tax Convention means that these agreements do not establish an obligation to exchange all types of information. It is particularly the case with Luxembourg, Singapore and Switzerland. 191. Luxembourg and Singapores domestic bank secrecy rules restrict exchange of information based on all DTCs signed prior to March 2009, including DTCs with Israel. Similarly, exchange of information with Switzerland based on DTCs signed prior to October 2010 is limited by its domestic bank secrecy rules. 192. The DTCs with the Netherlands, South Africa, Sweden, and the UK (as well as those with Germany and Switzerland which are not to the standard) include language, noting that exchange of information is restricted to information which is at their disposal under their respective taxation laws in the normal course of administration or similar. This wording does not limit Israels ability to respond to a request from these jurisdictions, as Israel regards all information they can obtain by using their access powers as information available under its taxation laws and in proper order at their disposal. It is noted, however, that while this is not an issue for Israel it may impose a restriction on the other jurisdictions ability to respond to a request, as they may interpret this language more restrictively. This is the case with the UK. Therefore, Israels DTC with the UK is not in line with the standard. 193. The Protocol to the Israels DTC with the Netherlands explicitly states that the obligation to exchange information does not include information obtained from banks or from financial institutions assimilated thereto or equivalent institutions. Due to this express limitation with regard to banking information, the DTC with the Netherlands is not in line with the international standard. 194. Although the number of Israels DTCs which are not in line with the standard is relatively low, these DTCs cover Israels important trading partners. It is therefore recommended that Israel updates these DTCs to include Article 26(5) of the OECD Model Tax Convention and to allow exchange of information in line with the international standard.
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25.
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Exchange of information in both civil and criminal tax matters (ToR C.1.6)
200. Information exchange may be requested both for tax administration purposes and for tax prosecution purposes. The international standard is not limited to information exchange in criminal tax matters but extends to information requested for tax administration purposes (also referred to as civil tax matters). 201. As noted previously (see Part C.1.1 of this report), four Israels DTCs provide for the exchange of information for carrying out the provisions of the convention and not for administering domestic laws. These agreements have the potential to limit the EOI to information foreseeably relevant for the purposes of civil tax matters only. 202. The confidentiality provisions in 13 agreements do not expressly provide for disclosure of information received to the authorities which are involved with the prosecution of tax matters. Israel advises that absence of this express provision does not limit the sharing of information with the authorities prosecuting tax matters and it places no restriction on the use of information by the requesting jurisdiction as far as such disclosure is consistent with the international standard with regard to confidentiality. It further, clarified that non-availability of these express provisions is not interpreted so as to decline providing information in criminal tax matters. Israel advises that an assessing officer in Israel may transfer information to an investigating assessing officer for opening a criminal investigation. After completing investigation process, the case is transferred to the prosecution for further treatment of an indictment.
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26.
DTCs signing dates: FYROM (23 Aug 2012), Malta (28 July 2011) and Panama (27 July 2011).
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In some cases time taken by Israel to bring its signed EOI agreements into force was more than 36 months.
209. Ultimately, the international standard requires that jurisdictions exchange information with all relevant partners, meaning those partners who are interested in entering into an information exchange arrangement. Agreements cannot be concluded only with counterparties without economic significance. If it appears that a jurisdiction is refusing to enter into agreements or negotiations with partners, in particular ones that have a reasonable expectation of requiring information from that jurisdiction in order to properly administer and enforce its tax laws it may indicate a lack of commitment to implement the standards. 210. Israels network of DTCs encompasses a wide range of counterparties, including All of its five major trading partners Almost all EU member states; 16 of the G20 members;
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211. Comments were sought from Global Forum member jurisdictions in the course of the preparation of this report. One jurisdiction has informed to have approached Israel and indicated its interest in entering into a TIEA. However, section 196 of ITO does not allow Israel to conclude international agreements solely for the purpose of exchange of information. As a consequence Israel cannot conclude any TIEA or other international agreement covering solely administrative assistance. This fact limits possibility of Israel and its partners to enter into agreements solely for the purposes of administrative assistance in tax matters. Therefore, it is recommended that Israel amends its domestic law to allow it to conclude such agreements and enter agreements for exchange of information (regardless of their form) with all partners interested in having such an agreement. An amendment of the ITO addressing the issue is currently under legislative procedure. 212. The Israeli authorities have an ongoing programme of establishing agreements and revising agreements where necessary in order to bring them to standard. This revision includes DTCs that Israel interprets as meeting the standard. No peers have reported that Israel declined to establish an EOI agreement with a jurisdiction seeking the same.
Determination and factors underlying recommendations
Determination The element is in place, but certain aspects of the legal implementation of the element need improvement. Factors underlying recommendations Israel has been approached by at least one jurisdiction to negotiate a TIEA, however, Israels law does not allow Israel to give effect to agreements solely for the purpose of exchange of information. Recommendations Israel should enter into agreements for exchange of information for tax purposes (regardless of their form) with all relevant partners, meaning those partners who are interested in entering into an information exchange arrangement with it.
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C.3. Confidentiality
The jurisdictions mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received.
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Determination
Recommendations
Jurisdictions should ensure that ownership and identity information for all relevant entities and arrangements is available to their competent authorities (ToR A.1) The element is not in place. Israel authorises the issuance of bearer shares by companies other than those registered on the stock exchange without having in place mechanisms for identifying the holders of those shares in all circumstances. Only 12 companies have issued bearer shares. Under the Income Tax Ordinance, foreign companies that are managed and controlled in Israel are considered tax resident in Israel. However, foreign companies that are managed and controlled in Israel by new immigrants or veteran returning residents are given an exception from this tax residency rule for a period of 10 years and ownership information on such companies is not ensured in Israel. Israel should take necessary measures to ensure that robust mechanisms are in place to identify the owners of bearer shares.
Israel should ensure that ownership information is available to its competent authority in respect of all foreign companies that are managed and controlled from Israel.
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Determination
Recommendations Israel should ensure the availability of identity information in respect of the settlors, trustees and beneficiaries of foreign resident settlor trusts and for trusts created by new immigrants and veteran returning residents which are vested with assets or income from assets abroad.
Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements (ToR A.2) The element is in place, but certain aspects of the legal implementation of the element need improvement. Israeli law does not ensure the availability of accounting records in respect of foreign resident settlor trusts having a trustee in Israel and for trusts created by new immigrants and veteran returning residents which are vested with assets or income from assets abroad for a period of 10 years. Israeli law does not ensure availability of accounting records in respect of activities outside of Israel of foreign companies that are managed and controlled in Israel by new immigrants or veteran returning residents for a period of 10 years. Israel should ensure that accounting records consistent with the standard are maintained for foreign resident settlor trusts having a trustee resident in Israel and for trusts created by new immigrants and veteran returning residents which are vested with assets or income from assets abroad. Israel should ensure availability of accounting records in respect of activities outside of Israel of foreign companies that are managed and controlled in Israel by new immigrants or veteran returning residents.
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Determination The element is in place, but certain aspects of the legal implementation of the element need improvement.
Factors underlying recommendations The AML/CFT laws only require retention of documents attesting the instruction to carry out transactions above the threshold of NIS 10 000 (EUR 2 000) or reported as suspicious transaction to the FIU.
Recommendations Israel should ensure that transactional information consistent with the standard is available in respect of all the accounts maintained with the banks.
Competent authorities should have the power to obtain and provide information that is the subject of a request under an exchange of information arrangement from any person within their territorial jurisdiction who is in possession or control of such information (irrespective of any legal obligation on such person to maintain the secrecy of the information) (ToR B.1) The element is in place, but certain aspects of the legal implementation need improvement. Israels access powers for the purpose of exchange of information under international tax agreements are not provided explicitly, in all cases, and are only applicable to requests made under double tax conventions. The tax authorities powers to obtain information from new immigrants, veteran returning residents and the trustees of foreign resident settlor trusts having a trustee resident in Israel in respect of foreign source income are inadequate Israel should ensure that its competent authority has the power to obtain all relevant information pursuant to requests under all exchange of information agreements (regardless of their form). Israel should ensure that its authorities have powers to obtain information from new immigrants, veteran returning residents and trustees of foreign resident settlor trusts which might be subject of an information request from its EOI partners.
The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the requested jurisdiction should be compatible with effective exchange of information (ToR B.2) The element is in place.
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Determination
Recommendations
Exchange of information mechanisms should allow for effective exchange of information (ToR C.1) The element is in place, but certain aspects of the legal implementation need improvement. Israels access powers for the purpose of exchange of information under international tax agreements are not explicitly provided for and are only applicable to requests made under double tax conventions. Eight of Israels DTCs are not in line with the international standard. Israel should ensure that its competent authority has the power to obtain all relevant information pursuant to requests under all exchange of information agreements (regardless of their form). Israel should continue its program of renegotiation of DTCs to incorporate wording in line with the OECD Model Tax Convention. Israel should take necessary measures to bring its exchange of information agreements into force expeditiously.
In some cases time taken by Israel to bring its signed EOI agreements into force was more than 36 months.
The jurisdictions network of information exchange mechanisms should cover all relevant partners (ToR C.2) The element is in place but certain aspects of the legal implementation of the element need improvement. Israel has been approached by at least one jurisdiction to negotiate a TIEA, however, Israels law does not allow concluding agreements solely for the purpose of exchange of information. Israel should enter into agreements for exchange of information for tax purposes (regardless of their form) with all relevant partners, meaning those partners who are interested in entering into an information exchange arrangement with it.
The jurisdictions mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received (ToR C.3) The element is in place. The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties (ToR C.4) The element is in place.
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Determination
Recommendations
The jurisdiction should provide information under its network of agreements in a timely manner (ToR C.5) The assessment team is not in a position to evaluate whether this element is in place, as it involves issues of practice that are dealt with in the Phase 2 review.
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ANNEXES 79
Israel fully supports the objectives of the Global Forum for Transparency and Exchange of Information (EOI) and is committed towards EOI. As of June 2013, Israel has a broad EOI network which includes 51 DTCs in effect. These agreements cover most of the EU members, 16 of the G20 members, almost half of the Global Forum members and all but four of the OECD members. It is our interest to broaden the network of EOI arrangements and apply them as efficiently as possible. The recommendations made in the report will be studied thoroughly and Israel will take effective measures to implement them. We would like to express our thanks to the assessment team for their intensive and dedicated work on the report.
27.
This Annex presents the jurisdictions response to the review report and shall not be deemed to represent the Global Forums views.
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80 ANNEXES
Jurisdiction 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 21 Austria Belarus Belgium Brazil Bulgaria Canada China Croatia Czech Republic Denmark Estonia Ethiopia Finland France FYROM Georgia Germany Greece Hungary Ireland
Date signed 29-01-1970 11-04-2000 13-07-1972 12-12-2002 18-01-2000 21-07-1975 08-04-1995 26-09-2006 12-12-1993 09-09-2009 29-06-2009 02-06-2004 08-01-1997 31-07-1995 23-08-2012 12-05-2010 09-07-1962 24-10-1995 14-05-1991 29-01-1996 20-11-1995 08-09-1995 29-06-1984 08-03-1993
Date in force 26-01-1971 01-01-2004 01-04-1975 21-09-2005 01-01-2003 27-07-1976 01-01-1996 01-01-2008 23-12-1994 29-12-2011 28-12-2009 01-01-2008 01-01-1999 18-07-1996 Not in force 01-01-2012 21-08-1966 06-03-1998 13-11-1992 15-05-1996 24-12-1995 01-01-1999 03-09-1985 24-12-1993
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ANNEXES 81
Jurisdiction 25 Latvia 26 Lithuania 27 Luxembourg 28 Malta 29 Mexico 30 Moldova 31 Norway 32 Panama 33 Philippines 34 Poland 35 Portugal 36 Romania 37 Russia 38 Singapore 39 Slovak Republic 40 Slovenia 41 42 South Africa South Korea
Type of EOI arrangement DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC
Date signed 20-02-2006 11-05-2006 13-07-2004 28-08-2011 19-07-1999 23-11-2006 02-11-1966 27-07-2011 09-06-1992 22-05-1991 26-09-2006 15-06-1997 25-04-1994 19-05-2005 08-09-1999 30-01-2007 10-02-1978 18-03-1997 30-11-1999 22-12-1959 02-07-2003 24-12-2009 22-01-1996 02-07-1973 14-03-1996 26-01-1993 26-12-2003 26-09-1962 15-09-1998 04-08-2009
Date in force 01-01-2007 01-01-2007 22-05-2006 Not in force 01-01-2000 01-01-2008 11-01-1968 Not in force 27-05-1997 01-01-1992 18-02-2008 01-01-1999 01-01-2001 06-12-2005 23-05-2000 01-01-2008 27-05-1980 01-01-1998 20-11-2000 03-06-1960 22-12-2003 01-01-2010 01-01-1997 09-09-1974 01-01-1999 01-01-1995 01-01-2007 13-02-1963 01-01-2000 01-01-2010
43 Spain 44 Sweden 45 Switzerland 46 Chinese Taipei 47 Thailand 48 The Netherlands 49 Turkey 50 U.S. 51 52 Ukraine United Kingdom
53 Uzbekistan 54 Vietnam
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82 ANNEXES
Commercial laws
Associations Law, 5740-1980 Companies Law, 5759-1999 Partnership Ordinance, 1975 Trust Law, 5739-1979 Monetary Law, 5771-2011
Tax laws
Income Tax Ordinance, 5721-1961 Income Tax Regulations, 5724-1963
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ANNEXES 83
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OECD PUBLISHING, 2, rue Andr-Pascal, 75775 PARIS CEDEX 16 (23 2013 23 1 P) ISBN 978-92-64-20252-8 No. 60835 2013
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