Israel

To see the determinations and rating of all published reports click here.

Overall Phase 2 Rating is Largely Compliant

Table of Determinations and Ratings of the Supplemental Review

Jurisdictions should ensure that ownership and identity information for all relevant entities and arrangements is available to their competent authorities. (ToR A.1)
Determination Factors Recommendations
The element is in place.   Israeli law does not ensure the availability of identity information in respect of the settlors, trustees and beneficiaries of foreign resident 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 for a period of 10 years if the trust is operated by a resident trustee who is not an attorney or an accountant covered by AML obligations.  Israel should ensure the availability of identity information in respect of the settlors, trustees and beneficiaries of foreign resident 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 in all cases. 
Phase 2 Rating Factors Recommendations
Compliant.     
Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements. (ToR A.2)
Determination Factors Recommendations
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 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.  Israel should ensure that accounting records consistent with the standard are maintained for foreign resident 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. 
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 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. 
Phase 2 Rating Factors Recommendations
Largely Compliant.     
   
Banking information should be available for all account-holders. (ToR A.3)
Determination Factors Recommendations
The element is in place.      
Phase 2 Rating Factors Recommendations
Compliant.     
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)
Determination Factors Recommendations
The element is in place, but certain aspects of the legal implementation of the element need improvement.   The tax authorities powers to obtain information from new immigrants, veteran returning residents and the trustees of foreign resident trusts having a trustee resident in Israel in respect of foreign source income are inadequate.  Israel should ensure that its authorities have powers to obtain information from new immigrants, veteran returning residents and trustees of foreign resident trusts which might be subject of an information request from its EOI partners. 
Phase 2 Rating Factors Recommendations
Largely Compliant.  The use of information gathering powers for exchange of information purposes is subject to certain conditions which appear in line with the standard. Nevertheless, as they were introduced only in January 2016 their practical application remains to be sufficiently tested.   Israel should monitor application of conditions for use of information gathering powers for exchange of information purposes so that the information is exchanged in line with the standard. 
Several changes in the legal framework as well as in practice have been made since the Phase 2 review in order to improve access to banking information for tax purposes. These changes however took place only recently and therefore remain to be sufficiently tested.   Israel should monitor access to banking information for exchange of information purposes and if necessary take further measures to ensure timely access to all banking information as required under the standard. 
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)
Determination Factors Recommendations
The element is in place.      
Phase 2 Rating Factors Recommendations
Largely Compliant.  Under the newly amended Income Tax Ordinance the authorised official is required to notify the Israeli resident taxpayer subject of the request of the intention to supply information concerning the taxpayer at least 14 days prior to the supply of the information unless the requesting jurisdiction requested not to notify the taxpayer. As the amendment came into force only in January 2016 it remains to be sufficiently tested in practice.  Israel should monitor application of the notification requirement to ensure that it does not unduly prevent or delay effective exchange of information. 
Exchange of information mechanisms should provide for effective exchange of information. (ToR C.1)
Determination Factors Recommendations
The element is in place.   In some cases time taken by Israel to bring its signed EOI agreements into force was more than 36 months.  Israel should take necessary measures to bring its exchange of information agreements into force expeditiously. 
Phase 2 Rating Factors Recommendations
Compliant.     
The jurisdictions' network of information exchange mechanisms should cover all relevant partners. (ToR C.2)
Determination Factors Recommendations
The element is in place.     Israel should continue to develop its exchange of information network with all relevant partners. 
Phase 2 Rating Factors Recommendations
Compliant.     
The jurisdictions' mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received. (ToR C.3)
Determination Factors Recommendations
The element is in place, but certain aspects of the legal implementation of the element need improvement.   Information received under agreements which do not provide for relief from double taxation will be treated only pursuant to Israel’s domestic confidentiality rules which allow use of information going beyond the standard.   Israel should ensure that confidentiality rules concerning information received under agreements which do not provide for relief from double taxation are in line with the standard. 
Phase 2 Rating Factors Recommendations
Largely Compliant.     
The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties. (ToR C.4)
Determination Factors Recommendations
The element is in place.      
Phase 2 Rating Factors Recommendations
Compliant.     
The jurisdiction should provide information under its network of agreements in a timely manner. (ToR C.5)
Determination Factors Recommendations
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.      
Phase 2 Rating Factors Recommendations
Partially Compliant.  Israel provided the requested information within 90 days in 12%, and within one year in 48%, of requests received over the period under review. It is also noted that response times increased since the Phase 2 review where 32% of requests were responded within 90 days and 54% within one year.   Israel should ensure that internal deadlines for obtaining and providing the requested information are respected to enable it to respond to EOI requests in a timely manner.  
The new EOI database allowing automatic monitoring of deadlines and generating of status updates became fully operational in September 2015 and therefore its impact on handling EOI requests remains to be sufficiently tested.   Israel should monitor provision of status updates so that the requesting authority is updated on the status of the request in cases where Israel is not in position to provide the requested information within 90 days.  
Israel has recently made several changes to improve its resources and streamline its processes which remain to be tested in practice. However, certain improvements still need to be done especially in respect of communication between Israel and its EOI partners so that the relevant information is provided in time and in the requested quality in all cases.  Israel should monitor recently made changes and take further measures as necessary to facilitate effective exchange of information.  

Earlier self-assessment based annual reports entitled Tax Co-operation 2010: Towards a Level Playing Field are also available.