Summary
Israeli residents are required to report and pay taxes on their global income, including income from abroad, even if the funds have not been transferred to Israel and even if the amounts are small.
New immigrants (Olim Hadashim) and returning residents are eligible for a tax exemption for 5-10 years from the date of their return.
In recent years, the Israel Tax Authority has developed advanced tools to track undisclosed foreign accounts, leading to increased investigations and penalties for those who fail to report.
Failure to report foreign income is a criminal offense and may result in an investigation or financial penalties. The best approach is to proactively engage with the tax authorities and voluntarily settle any outstanding reporting obligations.
Our firm specializes in this field, particularly for U.S. citizens and foreign investments.
Voluntary Disclosure 2025 – Take the First Step
Israel’s Global Taxation System
Israel’s tax system requires residents to report and pay tax on worldwide income, including foreign investments, rental income, and self-employed earnings.
For Israeli-sourced income, reporting is generally straightforward as the payer is required to withhold and report the tax. However, for foreign income, the responsibility falls on the taxpayer to open a tax file and submit annual reports.
Many Israeli residents hold foreign assets such as:
✅ Investment portfolios
✅ Foreign pensions
✅ Real estate abroad
✅ Trusts
Some mistakenly believe that reporting taxes abroad is sufficient or assume that since they have no business activity in Israel, they are not required to report. This is incorrect and may result in severe penalties and even criminal proceedings.
🔹 Important: New immigrants and returning residents may be eligible for a 10-year tax exemption on certain foreign income. If you fall into this category, consult with us to check your eligibility.
Is This a New Law? What Has Changed?
This is not a new law—global income reporting has been mandatory since 2003.
What has changed in recent years?
1️⃣ International Tax Agreements – Israel joined the FATCA and CRS agreements, requiring international banks and tax authorities to share financial information.
2️⃣ Technological Advancements – New tools now allow the Israel Tax Authority to identify unreported assets more effectively and enforce tax collection.
🔹 Failure to report income is a criminal offense and may result in investigations, penalties, and interest charges in addition to the unpaid taxes.
What’s the Solution?
Ignoring the issue is not recommended. The Israel Tax Authority is proactively identifying undisclosed foreign accounts and issuing fines.
Additionally, starting to report only from this year while ignoring past income could be seen as self-incrimination, increasing the risk of an investigation.
💡 Our recommendation:
We advise clients to engage in a voluntary disclosure process—a proactive approach to regularizing past tax obligations with the help of a professional CPA.
What Is Voluntary Disclosure?
Voluntary Disclosure is a process previously introduced by the Israel Tax Authority, allowing individuals to self-report unreported income while seeking protection from penalties and criminal charges.
Under previous guidelines, taxpayers who voluntarily disclosed income and met the required conditions received official immunity letters ensuring that they would not face criminal charges or excessive penalties, provided they paid the necessary taxes.
The official Voluntary Disclosure Program ended in 2019, but we have received indications from senior officials at the Israel Tax Authority that a new program is expected to launch at the end of 2025.
Although the exact terms of the new program are unknown, based on past experience, it will likely involve submitting detailed financial records and negotiating a settlement with tax officials. Lack of proper documentation can result in penalties or tax assessments exceeding actual liability—highlighting the importance of professional guidance.
🚀 Opportunity: Since no new program has been announced yet, this is an ideal window to proactively resolve tax issues under favorable conditions before stricter regulations take effect.
Why Work with Us?
✔ Over 150 successful voluntary disclosure cases handled across Israel
✔ No criminal charges or excessive fines imposed on any of our clients
✔ Expertise in unreported investment income, trusts, and real estate
✔ Specialized experience with U.S. taxpayers and Swiss investments
Our experience and strong connections with tax authorities help resolve cases efficiently, whether through legal opinions or expedited tax settlements.