Friday, June 2, 2023

Implementing FACTA by Israeli Banks

FATCA (Foreign Account Tax Compliance Act) was enacted in May 2010 and came into force in July 2014.

It obliges US taxpayers, namely holders of US passports and owners of US Social Security numbers, to report foreign financial accounts whose value exceeds $10,000, and offshore assets to the IRS (Internal Revenue Service). It also obliges foreign financial institutions to report financial accounts whose value exceeds $10,000 held by US taxpayers or foreign entities in which US taxpayers have a substantial ownership interest. This obliges US taxpayers, even if they do not live in the US and even if they have Israeli citizenship.

FATCA was enacted as part of the US struggle against tax non-compliance. By implementing this, the US seeks to tax all international income of its assessee. More specifically, the IRS seeks to collect taxes on its assessee accounts.

disclosure process

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


Banks had a duty to disclose to the IRS information regarding foreign accounts in the form of the Currency and Foreign Transaction Reporting Act of 1970 (commonly referred to as the “Bank Secrecy Act” or “BSA”) in the early 1970s. starring. The act requires financial institutions to keep records of cash purchases of negotiable instruments, report cash transactions over $10,000, and report suspicious activity indicating money laundering, tax evasion, or other criminal activity. The BSA is sometimes referred to as “anti-money laundering” legislation.

Several other “anti-money laundering” acts have been enacted to amend the BSA through the years, including provisions in Title III of the USA Patriot Act of 2001, until Congress passed FATCA in 2010, as demonstrated that additional separate and distinct reporting requirements apply to taxpayers. From the Bank Secrecy Act.

Bank of Israel Cooperation

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

In early 2014 the Bank of Israel instructed banks to prepare for the implementation of FATCA. Israel has committed to surrendering to the US information about US taxpayers’ accounts. In return, the US has to hand over information about Israeli taxpayers’ accounts to Israel.

These decisions affect approximately 100,000 US citizens living in Israel.

a punishment

A bank that does not provide requested information about its US customers is subject to penalties, ranging from heavy fines to being barred from the US. Several Swiss and Israeli banks have already failed to disclose the information. A huge fine has been imposed for the same. About their American customers. For example in 2009 UBS Bank was fined $780 million. Bank Leumi was fined $270 million.

US taxpayers may also be fined; They can be fined up to $100,000 or 50% of their account value.

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