Israeli Court Issues FATCA Injunction

by Lorys Charalambous, Tax-News.com, Cyprus

05 September 2016

The Supreme Court of Israel recently issued an interim order preventing the Israeli Government from transferring personal financial data to the US Internal Revenue Service under the Foreign Account Tax Compliance Act (FATCA).

The petition calling for an injunction on information exchanges under FATCA was filed on August 8 by Republicans Overseas Israel and accepted by the court on August 31, just one day before FATCA exchanges between Israel and the US were due to begin.

The US Congress enacted FATCA in 2010 to target non-compliance by US taxpayers using foreign accounts. It requires US financial institutions to withhold 30 percent of certain payments made to FFIs that do not agree to identify and report information on US account holders.

Foreign governments had two options for complying with FATCA: they could either permit their FFIs to enter into agreements with the IRS, or they could themselves enter into inter-governmental agreements (IGAs) with the US. Under the terms of the Model 1 IGA between Israel and the US, Israeli FFIs are required to report their information to the Israel Tax Authority, who will then automatically exchange the information with the US Treasury.

However, the decision by judge Hanan Meltzer places a temporary block on the transmission of information between Israel and the US pending a hearing on the petition, which is due to take place on September 12, 2016.

TAGS: court | compliance | Foreign Account Tax Compliance Act (FATCA) | tax | FATCA | Israel | agreements | Compliance | Tax

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