February 29, 2024
By George Rosenberg and Maya Saphier
On February 21, 2024, a draft of a new law memorandum was made public, inviting feedback from any stakeholders. The primary objective of these amendments is to strengthen transparency and align with the Global Forum’s standards on the exchange of tax information.
The need for these amendments arose due to the non-compliance with the OECD standard, particularly in cases involving trusts, new immigrants, and veteran returning residents. Notably, the lack of reporting obligations to the tax authority regarding the identity of Ultimate Beneficial Owners (UBOs) has been identified as a key issue.
In the context of new immigrants and returning residents, the absence of reporting and the associated tax holiday have been a longstanding concern for the Israel tax authorities, despite the government’s steadfast commitment to encouraging migration to Israel.
While the memorandum emphasizes its focus on the reporting of UBO identities and explicitly states no intention to impede existing tax exemptions, there is a potential concern that this could inadvertently pave the way for the elimination of these exemptions in the future.
Of noteworthy consideration is the exploration of the possibility of establishing a corporate registry containing UBO identities. This was highlighted in a memorandum released on July 10, 2023, where public commentary was sought on core aspects of the proposed registry. Among these aspects is the proposal to hold UBOs, as well as corporations, accountable for submitting reports. Failure to comply may result in administrative and/or penal sanctions for any related parties.
In conclusion, it is essential to emphasize that these proposed amendments are subject to professional review and will undergo an extensive legislative process. Additionally, it should be noted, as outlined in the proposal, that the amendments are anticipated to apply to new immigrants and veteran returning residents who migrate to Israel after June 2025. This timeline provides ample time for stakeholders to prepare and adapt to potential changes.
