On September 7, 2014, the Israel Tax Authority (“ITA”) published a new “Voluntary Disclosure Procedure” (hereinafter: the “Regular Procedure“) which is intended to replace the current voluntary disclosure procedure that was published in 2005. The Regular Procedure is effective from the date of publication thereof and up until December 31, 2016. Concurrently, and at the same time, a temporary order was published which is in effect from the date of its publication for one year up until September 6, 2015 (hereinafter: the “Temporary Order“) and which is based on the provisions of the Regular Procedure, but which allows special tracks (an anonymous track and an expedited track). Below are details of the main terms, conditions and possibilities set forth in the Regular Procedure and in the Temporary Order.

The Regular Procedure

The Regular Procedure relates to all tax offenses and not necessarily in connection with reporting of assets and income located abroad, including offenses in connection with real estate taxation, income and corporate taxation, VAT, purchase tax and customs.

The threshold conditions for being included in the Regular Procedure are similar, for the most part, to the conditions stipulated in 2005. Thus, for example, the application must be honest and it must be made in good faith, and the application must not be made at the same time as an investigation or examination by the ITA in the same matter and in respect of which, on the date of the application, the ITA has no prior information. Having said that, there are a number of new conditions set forth in the Regular Procedure, two of which are specify below:

• The new Regular Procedure grants an additional concession in the form of the undertaking that in the event of the rejection of the application, the ITA will not make use of the information which was provided in the application, neither in a criminal proceeding nor in a civil proceeding.

• An additional restriction which has been determined is that an application will not be approved if it does not include a significant tax payment, except in cases such as inheritances which are received and which do not generate significant tax, with the exception of the tax on the yields. In addition to the lack of clarity, this restriction is problematic because criminal immunity should not be dependent on the amount of the tax due. Furthermore, this restriction contains a kind of discrimination between the holders of extensive wealth which is not reported and the holders of small accounts.

The Temporary Order

The Temporary Order is based on the provisions of the main Regular Procedure so that compliance is required with the terms and conditions set forth therein (see above). Nevertheless, the Temporary Order contains additional possibilities which are not included in the main Regular Procedure:

• The Anonymous Track: in this track, it is possible to make an application without giving names or identifying details, up until the completion of the assessment proceeding, as was the case in the temporary order published about two years ago. Nevertheless, a period of time of 90 days has been determined (with the possibility of the extension of this period for an additional 90 days by the Tax Assessor), for completion of the assessment proceeding. Already at this point in time, the ITA should give its opinion regarding this time restriction given that, in all likelihood, it will not be possible to comply with it in all eventualities, due to various constraints, including of ITA itself.

• The Expedited Track: the expedited track is suitable for a taxpayer whose reported capital pursuant to the disclosure is up to NIS 2 million, and whose total taxable income is up to NIS 0.5 million. According to this track, which is not anonymous, the taxpayer declares and pays the tax together with the filing of the application (as part of the filing of tax reports). As far as we are concerned, this track is shrouded in obscurity, and it does not provide the certainty which the ITA apparently sought to provide. It is not even certain that the taxpayer’s position regarding his taxable income and the applicable tax will be identical to the Tax Assessor’s position, and this proceeding does not determine finality for the income and for the tax being reported and paid by the applicant, among other things, due to various claims of the ITA regarding the taxation of the source of the funds and many disputes are likely to arise in this regard.

Ostensibly, it is up to the applicant to choose which of the track he prefers, and in this regard, it would appear that in cases where there is a concern of disputes as stated above, then it would be advisable to examine the submission of an application in the anonymous track, rather than an application in the expedited track. The Temporary Order states that the Tax Assessor may, at his own initiative, refer the taxpayer to this track.