A voluntary disclosure is a process to correct inaccurate or incomplete information that you submitted to the CRA (examples: undeclared income, unauthorized expenditure deducted, form not produced, etc.)
How to make a voluntary disclosure?
To be valid and qualify for relief, a voluntary disclosure must meet certain criteria:
It must be complete, which means that you must submit all facts and documents relating to the information disclosed.You must also be ready to provide additional information within the time frame that will be given to you.
It must ensure that you avoid a penalty
- It must also cover information that is at least one year late. However, you may be able to include information that has been out of date for less than a year if it is accompanied by other information that is more than one year late.
- The advantage of using this process is to avoid the penalties and a portion of the interest that would be payable as a result of this correction. In addition, no lawsuit could be brought against you with respect to the information provided.
- Voluntary disclosure of information is a procedure that allows taxpayers to apply to the tax authorities and on their own initiative to provide information on income, profits and capital that they have not reported in accordance with the law. Taxes are paid in full, regardless of whether the taxpayer’s source of income is in Israel or abroad. In the event of compliance with all conditions of the procedure, with appropriate confirmation by the tax authorities, the criminal offense of tax offenses is removed from the offender.
- In September 2014, the tax department published a new procedure (which replaces the old procedure for voluntary disclosure of information), including new conditions for the removal of criminal responsibility.
- In addition, an interim order was issued with a validity of 1 year, which includes two additional ways compared to the previous procedure. “Anonymous way” – allows you to apply to the tax department without revealing the identity at the first stage of the identification of the applicant.
- And the “shortened path” – the algorithm according to which the process of voluntary disclosure is a submission of the corrected reporting – is possible in cases when it is a matter of profitability and the volume of capital of a relatively small size.
When is it recommended to implement a voluntary disclosure procedure?
Recently, our world is rapidly globalizing: offshore zones are being made more transparent, information exchange between banks and tax services, and also between tax services of different countries becomes routine. A key factor in this trend is the efforts of the US government to combat tax evasion and concealment of accounts. These efforts lead to changes in legislation and pressure on financial institutions. Pressure provokes a chain reaction – thus, information is passed on to tax authorities around the world, including Israel. Not so long ago, a story with UBS was revealed: it is alleged that hundreds of undeclared accounts of Israeli citizens were discovered.