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Implementation of FACTA by Israeli banks

FATCA (Foreign Account Tax Compliance Act) was legislated in May 2010 and went into effect in July 2014.

Requires US taxpayers, namely US passport holders and US Social Security number holders, to report foreign financial accounts worth more than $10,000 to the IRS, and assets abroad. It also requires foreign financial institutions to report financial accounts worth more than $10,000 held by US taxpayers or foreign entities in which US taxpayers have a substantial interest. This obliges US taxpayers even if they do not reside in the US and even if they have Israeli citizenship.

FATCA was enacted as part of the United States’ fight against tax noncompliance. By applying it, the US wants to tax all international income of its beneficiaries. More specifically, the IRS wants to collect taxes on the accounts of your beneficiaries.

disclosure procedure

Banks must locate US customers’ bank accounts and sign them on a W9 form. This is a Taxpayer Identification Number (TIN) and Certification Request Form. The form must be submitted to the IRS by June 30 of the following tax year.

History

Banks have had a duty to disclose foreign account information to the IRS since the 1970s, when the Foreign and Currency Transaction Reporting Act of 1970 (commonly known as the “Bank Secrecy Act” or “BSA”) was passed. ). enacted. The law requires financial institutions to keep records of cash purchases of negotiable instruments, file cash transaction reports in excess of $10,000, and report suspicious activity that may signify money laundering, tax evasion, or other criminal activity. The BSA is sometimes referred to as an “anti-money laundering” law.

Over the years, various other “anti-money laundering” laws have been enacted to amend the BSA, including the provisions of Title III of the USA PATRIOT Act of 2001, until in 2010 Congress passed FATCA which, as shown, imposes additional reporting requirements on separate and distinct taxpayers. of the Bank Secrecy Law.

Cooperation of the Bank of Israel

Many countries that have strong relationships with the United States have instructed their local banks to follow FATCA, as the Bank of Israel did.

In early 2014, the Bank of Israel ordered banks to prepare to implement FATCA. Israel has promised to provide the United States with information on American taxpayer accounts. The United States, in return, will provide Israel with information on Israeli taxpayer accounts.

These decisions influence an estimated 100,000 US citizens residing in Israel.

sanctions

A bank that fails to provide the required information on its US customers is subject to sanctions, ranging from heavy fines to a ban on access to the US. Several Swiss and Israeli banks have already been fined large sums of money in the past for not disclosing information. about their American clients. For example, in 2009 the UBS bank was fined 780 million dollars. Bank Leumi fined 270 million dollars.

Sanctions could also be imposed on US taxpayers; they may be fined up to $100,000 or up to 50% of their account value.

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