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The Exchange of Tax Information Portal is an initiative of the Global Forum on Transparency and Exchange of Information for Tax Purposes. The Global Forum conducts peer reviews of its member jurisdictions' ability to co-operate with other tax administrations in accordance with the internationally agreed standard. The standard provides for exchange of information on request where it is foreseeably relevant to the administration and enforcement of the domestic tax laws of the requesting jurisdiction. Effective exchange of information requires that jurisdictions ensure information is available, that it can be obtained by the tax authorities and that there are mechanisms in place allowing for the exchange of that information. The Global Forum's peer review process examines both the legal and regulatory aspects of exchange (Phase 1 reviews) and the exchange of information in practice (Phase 2). The EOI Portal will track the development of these peer reviews, including changes that jurisdictions make in response to the Global Forum's recommendations.

Peer Review: Israel Phase 2

This report for Israel has been published on 29 Oct 2014. You can buy this report, or browse it online below.

Skip directly to the Executive Summary. You may also want to view the tables of determinations and ratings.


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Determinations and Recommendations

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, but certain aspects of the legal implementation of the element need improvement.   Israel authorises the issuance of bearer shares by companies other than those registered on the stock exchange. There are mechanisms in place to identify holders of those shares in certain circumstances. Only 11 companies have issued bearer shares and only three of them are active.   Israel should take necessary measures to ensure that robust mechanisms are in place to identify the owners of bearer shares.  
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.  Israel should ensure the availability of identity information in respect of the settlors, trustees and beneficiaries of foreign resident trusts and for trusts created by new immigrants and veteran returning residents which are vested with assets or income from assets abroad. 
Phase 2 Rating Factors Recommendations
Largely 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
Largely Compliant.   The AML/CFT law requires that all transactional documentation carried out in the course of established business relationships must be kept regardless of any threshold. The obligation came into force only recently and is untested in practice.  Israel should monitor the availability of transactional documentation regardless of any threshold and effectively apply enforcement measures where documentation required under AML/CFT rules is not kept. 
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.   Israel’s 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.  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). 
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
Partially Compliant.      
Access powers in respect of banking information requested for civil tax purposes are not sufficiently effective to ensure that all banking information regardless of its type and difficulty to obtain is provided in a timely manner.   Israel should ensure that the competent authority can obtain all requested banking information in a timely manner. 
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
Compliant.      
Exchange of information mechanisms should provide for effective exchange of information. (ToR C.1)
Determination Factors Recommendations
The element is in place, but certain aspects of the legal implementation of the element need improvement.   Israel’s 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.  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). 
Eight of Israel’s DTCs are not in line with the international standard.   Israel should continue its program of renegotiation of DTCs to incorporate wording in line with the OECD Model Tax Convention. 
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
Partially Compliant.      
The jurisdictions' network of information exchange mechanisms should cover all relevant partners. (ToR C.2)
Determination Factors Recommendations
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, Israel’s 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. 
Phase 2 Rating Factors Recommendations
Largely 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.      
Phase 2 Rating Factors Recommendations
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 32% and within one year in 54% of requests received over the period under review. Response times increased over the period under review as Israel was able to respond 65% of requests within 90 days in the second half of 2010 and 17% in the first half of 2013.   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.  
Israel does not systematically provide updates to the requesting jurisdiction on the status of requests where the requested information is not provided within 90 days.   Israel should ensure that the requesting authority is updated on the status of the request in cases where it is not in position to respond within 90 days. 
Although Israel’s processes and resources are generally in place to ensure effective exchange of information, certain areas - mainly related to establishment and monitoring of deadlines and the workload of the EOI Unit - should be improved.   Israel should endeavour to improve its resources and streamline its processes for handling EOI requests to ensure that all EOI requests are responded to in a timely manner.