By: Eli Doron, Adv; Yaron Tikotzky, Adv, (C.P.A); Dr.Slomo Nass, Adv, (C.P.A)
Representation of account holders in banks abroad, listed as "Israel residents"
Representation of account holders in banks, listed in the records of banks in Switzerland and other countries as "Israel resident", with the assistance of an attorney and CPA specializing the Prohibition of Money Laundering Law and tax offenses
As you will recall, in view of international agreements on the exchange of information, the global banking system, banks in Switzerland, Luxembourg, Germany, and other countries are required to notify other OECD member states and/or the United States of bank accounts under the bank's management and the country of resident of each bank account holder. This means that banks around the world must know the country of residence of every account holder at their branches, and state this in the banking system's records for reporting to the country of residence of that account holder with respect to the existence of the account, deposits into it, and so forth.
In effect, the international agreements on which Israel and other countries are signatories require the banks to learn about each and every customer of the bank, every bank account holder, inter alia, his country of residence. The bank should know the country of residence of the account holder at the bank so that it can report to that country about the bank account of that customer, which is managed at the bank. For example, Swiss banks will have to report to Israel about their customers who appear in their records as residents of the State of Israel. Equally, Israel will have to report to the tax authorities of other countries about their residents who appear in the records of an Israeli bank. For example, Israeli banks will have to report to France about their customers who appear in their records as French residents; Swiss banks will have to report to Germany about their customers who appear in their records as residents of Germany; German banks will have to report to Israel about their customers who appear in their records as residents of the State of Israel; and so forth.
It is important to note on this matter that the bank has the duty to check the residence of the customer, and on the basis of the check, it should update its records and report to the country of residence accordingly. To obtain this data, the banks have various requirements, which have been tightened in recent years. Previously, banks were satisfied with utility bills to determine residency; today, banks now demand that the customer sign a declaration of residency and even obtain confirmation of residency for tax purposes as a medium for declaring country of residence. Moreover, banks currently take into account that it is possible that a customer has residency in more than one country, so the form that the customer must fill out offers the option of stating the countries of which he is a resident. All of these documents that the bank customer must sign explicitly state the account owner must report truthfully or he will be liable to a criminal offense.
The burning and important issue in banking
The issue of recording residency at the bank is one of the burning issues in banking, money laundering, and taxes – it turns out that bank account owners are prepared to make major changes in their lives in favor of revising the records at the banks in order to update the country of residence. Consequently, many bank account holders move from country to country in order to ensure that the bank will not have to report residency to the country of origin of the account holder. As a result of the aforesaid, many Jews who have immigrated to Israel left France, Russia, and other states in large part to avoid a situation in which the bank has to report to their country of origin about money in their bank accounts. The problem in practice is that account holders in Switzerland and many other countries committed untoward criminal acts, so that the foreign bank would not report to their real country of residence, but to their country updated in the bank's computers as the country of residence, even if it is not necessarily the up-to-date or correct country of residence of the customer. In other words, many account holders have taken illegal and/or borderline and/or criminal actions just to mislead the bank and cause it to report about the account to a
different country from the one that is the customer's country of residence in practice.
Many question emerge in this context
how do states accept reports from different banks, when they receive reports about account holders at a bank who are listed at foreign bank as "Israel residents" or residents of another country, when in practice the tax authority learns that this is incorrect? Consequently, the Israel Tax Authority will apparently receive names of numerous holders of overseas bank accounts who report to the foreign banks that they are not Israeli residents, to both the banks and other parties, when in practice they are not Israeli residents. The question is what to do with this information? What will the Israel Tax Authority do with this information? Will it notify the foreign bank that the account holder is not an Israeli resident? Will the Israel Tax Authority hold its peace? How will other states behave? All of these are hard and complex issues to which should be addressed.
How can help in this matter?
Our firm comprises attorneys and CPAs, who formerly worked at the Tax Authority, who can offer a legal and transparent response to such clients; clients who have foreign bank accounts. We can advise the foreign bank account holder on what to do, so that his actions will be legal and transparent. We understand that many account holders who are out of the country are reported as having different residency from what they actually have; these account holders face possible legal jeopardy, which should be neutralized. We can help these clients with the law and transparency – as mentioned, our firm are experts in capital authorization; we have former Tax Authority officials, economists, and others who can provide a comprehensive response.
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