In another 5 days, all financial information about US citizens, holders of a green card, and that of Israeli residents who have funds in bank accounts and benefit funds in Israel will be delivered to the Israel Tax Authority for transfer to the US authorities under Israel's FATCA agreement.
This is the result of the Israeli High Court of Justice's decision on the 12th of September regarding a petition filed with it in January 2016, seeking to prohibit any attempt by the government to share and release the details of financial accounts with the IRS.
In its initial temporary injunction which was issued end of August, the Court temporarily blocked the Israeli government from transferring financial information of American citizens to the U.S. Treasury, until it would have determined whether the release of information by Israel to the US constitutes a "violation of privacy, property and equal treatment lacking a compelling public purpose".
On September 12, Israel's High Court of Justice in fact rejected the claim of the petition and cancelling its temporary injunction. The court stressed that persons who received prior notice that details of their accounts will be reported to the US tax authorities shall be granted 30 days to respond to that intention to release information. Once an interested person has submitted an appeal regarding such a decision by a financial institution, the financial institution must first respond to the appeal before account information may be released.
In light of the above order to implement the High Court decision, the Israeli tax authorities granted an ex- tension to financial institutions for filing their reports until September 30, in order to enable objections to be filed and for banks to relate to any objections already filed by the account owners. Under the income tax regulations (implementation of the FATCA agreement), financial institutions were originally obligated to provide information by September 20, 2016, through a dedicated website of the Israel tax authorities.
While the issuance of the precise opinion of the High Court is still pending, the court apparently reminded that 'privacy is very limited in modern life' and that this new reality has now been codified into law. When the Court explained that the legislation passed to allow Israel to transfer financial data to the US does not violate Israel’s Basic Laws of Human Dignity and Liberty it interestingly noted that the acceptance by the United States itself supports a presumption of constitutionality. The court did not relate to the far-reaching extraterritoriality of the US FATCA laws whereby the United States delegates its tax enforcement and financial policing to foreign authorities and banks.
The Foreign Account Tax Compliance Act (FATCA) requires foreign banks to report information about the accounts of their American clients to the United States Treasury if the total balance equals or exceeds $50,000. Israel has signed a Model 1 ('IGA 1') FATCA agreement with the USA by which Israeli banks and financial institutions must report relevant information to the domestic tax authorities for later forwarding to the IRS. A number of amendments were implemented to tax law allowing the tax authorities to release information which was - until these amendments - prohibited. Between Israel and the United States a Tax Information Exchange Agreement (TIEA) is in place ensuring that banks report FATCA information to the U.S. Treasury.
A great number of Israeli's living and working in the US, and similarly so Israel residents holding US citizenship who own monies in Israel, have come under these regulations. Banks Israel have become wary of opening accounts for US citizens and green-card holders, while substantial additional compliance and costs related to FATCA requirements may put dual US-Israeli citizens job applicants at a disadvantage.