Change to the Procedural Requirements at the Bank of
The Bank of Israel has recently implemented measures that are
designed to minimize legal and reputational risks for Israeli
banks. The Bank of Israel circulated a draft directive for all
Israeli banks by virtue of which all foreign (non-Israeli resident)
account holders must sign a declaration that confirms that they pay
taxes on the income generated in their Israeli bank account in
their resident jurisdiction. In addition, the draft directive
requires foreign account holders to sign a confidentiality waiver
pursuant to which Israeli banks would be allowed to pass bank
account information to non-Israeli tax authorities. This would make
it possible for Israeli banks to provide the Canada Revenue Agency
(the "CRA") with information about the
income that a Canadian resident earned in an Israeli bank account.
The move by the Bank of Israel marks another step in the global
battle against tax evasion.1
Many Canadian residents with accounts at Israeli banks first
learn about the declaration when they are approached by their
Israeli bank. A large number of Canadian residents have been caught
off guard by the request to sign the declaration, and, in some
cases, have even been surprised by the fact that there is an
obligation to report and pay taxes in Canada on the income earned
in an Israeli bank account.
If a Canadian taxpayer has an account at an Israeli bank that
generated unreported income, that taxpayer may be liable for
interest, penalties, and taxes owing, and, in certain
circumstances, could be subject to prosecution for tax evasion.
Fortunately, the CRA has a Voluntary Disclosures Program in place
that can be undertaken in order to minimize, if not eliminate, the
possibility of a penalty assessment and prosecution. In order to
minimize the possibility of being prosecuted by the CRA for tax
evasion, we advise any Canadian taxpayer who may have unreported
income from an Israeli bank account to consult with a tax lawyer
about the possibility of utilizing the Voluntary Disclosures
How to Qualify for Voluntary Disclosures Program
There are a number of conditions for qualifying for the
Voluntary Disclosures Program. A legal advisor can help ensure the
qualifications are met while protecting the taxpayer's rights.
Generally, in order to ensure that the disclosure is valid under
the CRA program, a taxpayer must satisfy the following four
The disclosure must be voluntary;
The disclosure must be complete;
The disclosure must involve the application of a penalty;
The disclosure must include information that is at least one
year past due.
A legal advisor can assist the taxpayer by:
Drafting the required submission and filing it in a way that
Requesting relief from all penalties that would otherwise
Negotiating the elimination of interest that would otherwise
Since a disclosure must be voluntary in order to be valid, it is
important to come forward before the CRA conducts an investigation.
If a taxpayer's Israeli bank provides information to the CRA
and the CRA reassesses the taxpayer for taxes owing – it will
likely be too late to take advantage of the
Voluntary Disclosures Program.
1 In recent years a number of steps have been taken
by Canada and other countries to make sure that tax evasion is a
thing of the past. For example, on February 5, 2014, Canada and
U.S. signed an intergovernmental agreement under the Canada-U.S.
Tax Convention. Pursuant to that agreement, relevant information on
accounts held by U.S. residents and U.S. citizens in Canada will be
reported to the CRA. The CRA will then exchange this information
with the IRS. New Part XVIII of the Income Tax Act (Canada) was
added to require certain Canadian financial institutions to report
information with respect to accounts held by certain U.S. persons
to the CRA.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).