Panama Capers
Most readers will be aware of the Panama Papers. There are 11 million documents to read, but few remarks already come to mind. Panama is one of 60 or more tax havens and was assumed to be more confidential than most others. Clearly not any more – not only because of the latest leak, but also the move toward FATCA for US persons and the OECD Common Reporting Standard (CRS) for most of the world’s citizens.
These are automatic information-exchange initiatives, and even Panama has signed up to the second wave of the OECD’s CRS.
This means that in 2018, Panamanian financial institutions are supposed to start sending details of all accounts held by non-Panamanians in 2017 onward to the tax authorities of the countries of residency of those account holders via the Panamanian Government Tax Authority. So the Panama Papers may have only accelerated things by around nine months.
You can find more on the Panama Papers at the website of the International Consortium of Investigative Journalists (panamapapers.icij.org). There you can make a donation, file a leak, read the Global Muckraker or even play a game called Stairway To Tax Heaven.
Since 2003, Israeli residents have been required to report and pay Israeli tax on worldwide income and gains. Currently, the Israeli tax rates for most dividends, interest and capital gains is 25 percent to 27%, less a credit for any foreign taxes paid, assuming the taxpayer holds under 10% of the investee.
New Israeli residents and senior returning residents (who lived abroad more than 10 years) are exempt from Israeli tax on overseas income and gains if they became Israeli resident on or after January 1, 2007. The benefits are more limited for anyone who became Israeli resident before then.
What should a person do if they made under-reported income or gains? Consider urgently initiating a voluntary disclosure procedure (VDP). Many countries offer a VDP.
In Israel there are several such procedures. The most commonly used is the “anonymous” VDP procedure, whereby the taxpayer’s advisers negotiate first, then reveal the taxpayer’s name once a draft settlement is reached.
The Israeli anonymous procedure, if desired, must be requested by June 30, 2016. By then, the data needs to be collated and the tax calculated. It is also important to check there is written proof that the capital is derived from a taxed or exempt source. Otherwise, the capital may be taxed too.
Interest and linkage will be added to the tax, but usually there are no fines in Israel (unlike the US). Additional rules apply to the Israeli VDP and to trusts, where relevant.
If the taxpayer is already under inquiry, the Israel Tax Authority won’t provide immunity from criminal prosecution. But it says it won’t use anything the taxpayer discloses under the VDP. So the more the taxpayer discloses, the less the ITA will use against the taxpayer.
As always, consult experienced tax advisers in each country at an early stage in specific cases.