The Israel Tax Authority (ITA) has announced a new voluntary disclosure procedure (VDP), a tax amnesty. It is a useful way of coming clean about past unreported income and may boost tax revenues. But it might not be for everyone.
The amnesty began when published on August 25 and ends on August 31, 2026.
Why try?
In our experience, typical amnesty candidates include anyone moving money internationally, as the banks generally block untaxed money.
Additionally, companies with tax skeletons in the closet find it difficult to be acquired or to go public on a stock exchange.
The carrot
In applicable cases, the ITA, in conjunction with the Attorney-General’s Office, is willing to commit to refrain from initiating criminal proceedings against anyone who makes a voluntary disclosure if they meet all the conditions.
These conditions are outlined in Standing Rules and are further explained in ITA Operating Instructions (10/2025). They contain no reliefs not found in the law. The rules are more detailed than in the amnesty of 2011-2019.
Which taxes?
The amnesty has a broad coverage including income tax, capital gains tax, real estate taxes, VAT, import taxes, cash transactions over permitted limits and various money laundering offenses.
The amnesty is open to Israeli and foreign residents. Trusts are also included – if settlors, trustees, and beneficiaries want the amnesty they must all apply.
Preconditions
The rules require full and frank disclosure in good faith. Unlike the last amnesty, anonymous applications won’t be accepted.
Certain people cannot apply if they are already on the ITA’s “radar,” namely: (1) if they were convicted, paid a fine in lieu of prosecution, or had a previous amnesty application accepted; (2) they or a related party are under a tax or police investigation; (3) if the ITA already has information relevant to the amnesty application.
The ITA reserves the right to turn down an amnesty application if material information about them or a related party exists at: other authorities, mainline media, or court documents in Israel or abroad.
Regular and fast tracks
For income tax cases, there will be a regular track and a fast track (“green track”). The fast track is for smaller cases: (1) financial assets in a foreign financial institution below NIS 4 million at the end of 2024, and there were no deposits or movements in the amnesty period (not apparently defined); (2) Unreported rental income in Israel and/or abroad not more than NIS 250,000 per year; (3) Unreported income from digital (crypto) assets not more than NIS 500,000 and their fair value at the end of 2024 didn’t exceed NIS 1.5m.; (4) a combination of the above.
Fines
If an applicant files materially amended tax returns under the amnesty, lateness fines will generally be imposed on top of the tax due.
If an applicant doesn’t file amended tax returns, additional “deficiency fines” of 15%-30% of the tax may also be imposed.
The Assessing Office has discretion to relax or waive fines based on considerations that include: (1) income now reported not material relative to declared income and capital; (2) tax on income now reported not material relative to the tax debt including fines (comment: unclear); (3) Degree of involvement of the taxpayer; (4) Taxpayer’s compliance record generally; (5) Age or health factors; (6) Other grounds.
Miscellaneous
Losses and foreign tax credits can be claimed regarding amnesty income. But prior year losses and foreign tax credits cannot be used in the amnesty. Excess amnesty losses and foreign tax credits cannot be used after the amnesty period.
Under detailed forex rules, foreign currency amounts should generally be translated at actual exchange rates on the dates transactions occurred.
Should a delinquent taxpayer who meets the preconditions go for this amnesty?
In our experience, a key challenge is documentation. Is all relevant documentation available for all years concerned.
If so, an amnesty request may be worth considering – especially in smaller cases eligible for the fast (green) track.
The problem is that if the taxpayer can’t reach an assessment agreement with the ITA, e.g. due to lack of documentation, the ITA will issue a best judgment assessment (really a worse case assessment). So don’t go into an amnesty until you are ready.
As always, consult experienced tax and professional advisers in each country at an early stage in specific cases.
The writer is a certified public accountant and tax specialist at Harris Consulting & Tax Ltd.