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Supreme Court of Israel temporarily delays transfer of tax information to United States

The Foreign Account Tax Compliance Act, or FATCA, has major implications for people with dual citizenship in Israel and the United States. Under FATCA, foreign financial institutions are to provide account information for taxpayers holding more than $50,000 in foreign accounts to the U.S. government. Institutions that refuse to provide this information could face a withholding tax of up to 30% on any U.S. assets. FATCA is controversial in many locales as many believe the U.S. Government is infringing on privacy and interfering with the sovereignty of other nations.

Regardless, on September 1, the Israeli Tax Authority was to begin transferring information of U.S. citizens with Israeli accounts to the United States in accordance with FATCA. These plans were delayed and possibly derailed, however, when the Supreme Court of Israel ordered the temporary halt of this transfer. The Supreme Court of Israel will hear arguments into whether Israel is obligated to follow FATCA in mid-September.

What are the implications of FATCA for people with American and Israeli citizenship?

Israeli citizens who maintain dual citizenship in the United States who have more than $10,000 in a foreign bank account are already required under U.S. law to file a Report of Foreign Bank and Financial Report (FBAR) statement. Under FATCA, the information provided to the U.S. Government could be far more extensive, raising privacy concerns.

Furthermore, these laws have practical implications as well. Many foreign financial institutions will refuse to allow Americans with dual citizenship to open accounts, citing the cost of compliance with FATCA and other laws.

As to how the Supreme Court of Israel will rule, no one can be sure. Some analysts believe it is unlikely that Israel would potentially harm its relationship with the United States over the release of bank account information. Others believe the Supreme Court will take a different approach. Whatever the Court decides, the result will have far-reaching consequences.

International tax issues demand legal counsel of the highest caliber. Based in Manhattan and serving an international clientele, Goldburd McCone LLP provides exceptional representation in a wide range of taxation matters.

Sources: FATCA: Could Israeli Injunction On US Sovereignty 'Violating' Tax Law Prompt Rethink?, Forbes.com, Roger Aitken, September 3, 2016 Israel Supreme Court Temporarily Blocks State From Transferring FATCA Info to IRS, The Jewish Press, September 4, by Hana Levi Julian, FATCA is Here to Stay Regardless of Israel's Supreme Court Temporary Stay, The Jewish Press, September 7, 2016

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