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Olim Hadashim who have completed 10 years of aliyah
The preventive declaration of assets in Israel is an important subject for Olim Hadashim who are at the end of their 10-year Aliyah.
In this article, we'll look at the ins and outs of the asset declaration and what Olim Hadashim need to know.
It is recommended that every resident returning to Israel or Olim Hadashim, at any time after the end of the 10-year period of tax favors, prepare a "voluntary wealth declaration" accompanied by all supporting documents, in order to determine the wealth accumulated abroad, not subject to tax in Israel.READ ALSO: ASSET DECLARATION IN ISRAEL
The 10-year exemption on foreign assets
An Ole Hadash or returning resident (a person who has returned and been resident in Israel after having been a foreign resident for at least ten consecutive years) is not required to declare income produced or generated abroad or from property located abroad for the ten years following the time he became resident in Israel.
In addition, an Ole Hadash or returning resident is exempt from declaring his assets and property accumulated abroad for a period of ten years from the time he became resident in Israel ("period of favor").READ ALSO: OLE HADACH TAX BENEFITS FOR 10 YEARS
What changes after the 10-year exemption?
Section 135 (1) of the Income Tax Act states that "in order to obtain full knowledge of a person's tax situation, a tax inspector may require that person to provide him with a written report on his assets, or those of his spouse and children.
The main purpose of the declaration of assets in Israel is to examine the veracity of the annual reports submitted by the applicant, as an additional tool available to the tax auditor.
However, section 135 (1) (b) of the Law stipulates that a person who was for the first time resident in Israel or who is a returning resident, as mentioned in section 14 (a), is not required to submit a report on his assets located outside Israel for a period of ten years from the date on which he became resident in Israel.
This exemption does not apply if the estate is a source of income for which the individual has requested not to be tax-exempt, or if the estate has been given as a gift to the individual and is tax-exempt under article 97 (a) (5) of the law.
Let's do the math!
At the end of the 10-year tax-free period following aliyah, when a request for a declaration of assets is received from the Israeli tax authorities, the taxpayer must declare all his assets, both those accumulated abroad before his arrival/return to Israel and those accumulated after his arrival/return.
In order to determine whether assets accumulated abroad are not subject to tax in Israel, it is advisable to prepare a detailed declaration of preventive assets in Israel, accompanied by all supporting documentsto determine the taxpayer's financial situation at the end of the 10-year period.
When you prepare this preventive declaration, it helps to build up a "tax-free base" that you can then present to the Israeli tax authorities.
It is best to make this declaration towards the end of your 10 years of Aliyah.
Watch out!
The Israeli tax authorities may ask to see your French tax return if they have any doubts (even during the 10-year period).
If you are concerned by this request from the Israeli tax authorities, please do not hesitate to contact us.
Unexplained financial variance
It is important to note that when an unexplained financial discrepancy is identified, the burden of proving the origin of the discrepancy lies with the taxpayer.
Consequently, a new immigrant or returning resident who has completed his or her 10-year exemption period must explain that some of his or her income was accumulated during said exemption period.
In the absence of such an explanation, financial discrepancies may be taxed by the Israeli tax authorities.
It's also important to understand that failure to comply with these requirements can result in substantial fines and financial penalties.
The Israeli tax authorities can also carry out an in-depth tax investigation to determine whether income or assets have been omitted or concealed.
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Other issues
In addition to the above, it should be noted that the declaration of assets is an important parameter that informs transparency vis-à-vis the tax authorities, and is also of importance in the event that the taxpayer plans to transfer money to Israel via the banking system, either through savings or through exchanges for the realization of property abroad.
The citizen's ability to show the tax auditor in charge on behalf of the bank that the money or assets have already been declared to the tax authorities originally can greatly neutralize fears of money laundering and/or violations of the Prohibition of Money Laundering Law, allowing the declaration to be used to effect money transfers from bank accounts abroad to bank accounts in Israel.
However, each case must be examined on its own merits.
How can I protect myself?
It is advisable to seek advice from a tax expert regarding such a declaration of assets to avoid disagreements with the tax agent and excessive tax payments.
An accurate, real-time estimate can save you a lot of tax, as required by law.
Don't hesitate to contact us.
In a nutshell:
The preventive declaration of assets in Israel is an important tool for avoiding problems with the tax authorities in Israel.
Residents returning to Israel or Olim Hadashim should be aware of their tax obligations. .
Objective :
Preparing for the end of 10 years of Aliyah.
Your questions - our advice
- Can I postpone my 10th anniversary of aliyah?
- How can you be sure that certain income was exempt during the 10 years of aliyah?
- So can the Israeli tax authorities retroactively tax the income from the 10-year exemption if I can't prove it?
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