This document discusses voluntary tax disclosure and trust settlements with the Israeli Tax Authority. It provides background on the speaker's qualifications and experience in international taxation and settlements. It outlines the purposes and conditions for voluntary disclosure, including receiving immunity from criminal sanctions and disclosing previously unreported income and assets. It describes the two-step process for preparing an application, which involves gathering documents, analyzing tax exposure, and applying to settle both criminal and civil issues. It also covers considerations for settling foreign settlor trusts and typical tax rates applied in trust settlements based on past experience.

1. Artzi,Hiba&Elmekiesse
www.ahe-tax.co.il
The Voluntary Disclosure and
Trust Settlement in Conjunction
with The Israeli Tax Authority
Ascott Hotel - Zurich
February 5th 2014
Hagi Elmekiesse, C.p.a. (Adv.) - Partner
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2. Artzi,Hiba&Elmekiesse
www.ahe-tax.co.il
CPA and Advocate (Israel).
Worked at the Israeli Tax Authority.
One of the founders of the International Tax Unit at
the Israeli Tax Authority, January, 2001.
International Tax Partner at Artzi,Hiba&Elmekiess.
Specializes in international taxation and in
complicated tax settlements with the Israeli Income
Tax Authorities.
Personal background
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3. Artzi,Hiba&Elmekiesse
www.ahe-tax.co.il
Purposes:
Receiving immunity from the Israel Tax Authority
(“ITA”) regarding criminal sanctions
(interrogations, arrests, indictment/criminal fines).
Disclosure of income, assets and funds that were not
reported to the ITA in the past.
Purpose of the “Voluntary
Disclosure” and its conditions
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4. Artzi,Hiba&Elmekiesse
www.ahe-tax.co.il
Conditions:
A truthful application, not resulting from an
investigation or examination conducted by the ITA.
No prior information in possession of the Tax
Authority or any other governmental authority
related to the voluntary Disclosure.
No examination was made in the ITA at the civil
level.
Purpose of the “Voluntary
Disclosure” and its conditions
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5. Artzi,Hiba&Elmekiesse
www.ahe-tax.co.il
Conditions:
Published media information as well as information
included in documents submitted to Israeli courts
are considered as information in the possession of
the ITA.
Removal of the civil infringement (tax payment).
Purpose of the “Voluntary
Disclosure” and its conditions
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6. Artzi,Hiba&Elmekiesse
www.ahe-tax.co.il
Two steps when dealing with a potential client:
and analyzingdocumentsGathering data &:1Step
the tax exposure.
andthe criminalsettletoITAApplying to the:2Step
civil infringement.
Preparation of an application to
a voluntary disclosure
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7. Artzi,Hiba&Elmekiesse
www.ahe-tax.co.il
During this stage there is no contact with the ITA.
Gathering of all the facts to be used as background
when preparing the application,
Explanations regarding the funds’ origin (gift?
Inheritance? Trust distribution? Etc.)
Preparation of supporting documents regarding the
funds’ origin and the funds’ yields.
Step 1: Gathering data & documents
and analyzing the tax exposure
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8. Artzi,Hiba&Elmekiesse
www.ahe-tax.co.il
Bank data for each year ends - 31.12.X.
Bank data regarding yields (interest, dividend,
realized capital gain).
Step 1: Gathering data & documents
and analyzing the tax exposure
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9. Artzi,Hiba&Elmekiesse
www.ahe-tax.co.il
Analyzing the tax exposure:
Calculating the tax exposures in Israel regarding
incomes accrued in the account.
Evaluating the tax exposure regarding the fund’s
original deposits or the fund’s balance at a specific
date.
Step 1: Gathering data & documents
and analyzing the tax exposure
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10. Artzi,Hiba&Elmekiesse
www.ahe-tax.co.il
Settling the criminal infringement :
Written application to the ITA including the case’s background, facts
and details regarding the income amounts not reported.
The ITA examines possession of prior information related to the
Voluntary Disclosure, in the ITA, other governmental authorities,
published media and judiciary documents.
Answering questions / delivering clarifications to the investigating
unit and transferring documents- as requested.
Receiving approval that no criminal prosecution will be
conducted - “Insurance policy”.
Step 2: Applying to the ITA to settle
the criminal and civil
infringements
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11. Artzi,Hiba&Elmekiesse
www.ahe-tax.co.il
Step 2: Applying to the ITA to
settle the criminal and civil
infringements
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Settling the civil infringement:
Applying to the civil tax assessing office.
The application is made parallelly or after the
application to a voluntary disclosure is made.
In some cases - possibility to apply anonymously
to the assessing officer before the application to a
voluntary disclosure.

12. Artzi,Hiba&Elmekiesse
www.ahe-tax.co.il
Step 2: Applying to the ITA to
settle the criminal and civil
infringements
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Settling the civil infringement:
Negotiating with the ITA regarding tax liability
concerning the fund’s original deposits or the fund’s
balance at a specific date.
When lack of information - risk of higher effective tax
rates on the funds.
At the end of the civil procedure- an agreement with the
ITA is signed, settling the funds and detailing the
total tax to be paid.

13. Artzi,Hiba&Elmekiesse
www.ahe-tax.co.il
Trust Settlements – In General
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Application is done on an anonymous basis.
Only a civil process - do not need to submit a request to
the investigating unit of the ITA.
Expertise in the ITA - only two assessing offices are in
charge of trusts.
Settlement procedure – same as voluntary disclosure:
Step 1: Gathering data & documents.
Step 2: Submitting a request to the ITA.

14. Artzi,Hiba&Elmekiesse
www.ahe-tax.co.il
Trust Settlements -
Foreign Settlor Trust (“FST”)
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As of 1.1.2014. following the amendment no’ 197 to the Israel
Tax Ordinance.
Our firm participated in the ITA’s “committee for determining
Settlements for Trusts”.
Expected Application to trusts whose settlors are foreign
residents.
Principle - tax levy on the trust’s capital as of the date of
31.12.2013 (and on distributions made in the past years)

15. Artzi,Hiba&Elmekiesse
www.ahe-tax.co.il
Tax rates levy in Trust
Settlements
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Base upon our past experience, we believe the ITA shall levy
high tax rates, when the more “problems” with the trust.
Relative Trust with “characteristics” of influence by the
beneficiary
Relative Trust with “characteristics” of influence
by the beneficiary and by the desist settlor
Trust without any family relations

16. Artzi,Hiba&Elmekiesse
www.ahe-tax.co.il
Tax rates levy in Trust
Settlements
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Characteristics for the beneficiary’s influence on the trust:
Authority to determine the beneficiary.
The beneficiary can influent the trustee.
Managing the trust’s assets.
Granting services to the trust.

17. Artzi,Hiba&Elmekiesse
www.ahe-tax.co.il
Experience With Tax Settlements
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In the past 5 years our firm settled with the ITA, as follows:
About 300 applications regarding voluntary disclosure.
About 30 applications regarding trusts.
Consequences of these applications:
About 90% of the cases were settled with tax levy (on the
asset) ranging from 5% to 18%.
anonymous appointment to our firm are possible.

18. Artzi,Hiba&Elmekiesse
www.ahe-tax.co.il
Thank you !
You are welcome to visit our website:
www.ahe-tax.co.il
Hagi’s e-mail: hagi@ahe-tax.co.il
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