Israel Tax Administration Imposes “Capital Declaration” Reporting Obligation on Trusts | Fox Rothschild LLP

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For the first time since Israel began taxing trusts, the Israel Tax Authority (ITA) has sent inquiries to certain trusts for a declaration of global assets and liabilities as of December 31, 2019. We have heard. that this declaration may be required of all trusts. in the future; However, this has not been officially announced.

For US trusts with Israeli resident beneficiaries, this statement is important and should be prepared with care.

According to an Israeli tax expert, the statement must provide summaries of investment portfolios held with banking and other financial institutions, including the cost of individual investments (or, if not available, their fair market value. , which can be justified by one year – end declaration).

ITA is also asking for details on:

  • financial investments, including their cost
  • other investments, including private companies and partnerships
  • investments in real estate, including the initial cost and the date of acquisition of these investments
  • debtors and creditors
  • loans made and received and mortgages owed
  • underlying companies, wholly owned by the trust, including the assets and liabilities contained in these companies

Note: All items listed in the declaration must be accompanied by supporting documents.

Currently, the required capital declaration form distributed by the ITA is only in Hebrew, but we expect Israeli tax professionals to develop an appropriate form in English soon. Additionally, Israeli professionals will likely discuss this disclosure with the ITA to clarify the necessary information.

Most capital declaration forms relating to trusts already known to the ITA must be received directly by the Israeli custodian. If the trustees receive these forms, they should be forwarded to the reporting professional as soon as possible.

At this point, Trustees who have received such notification from the ITA should begin collecting the information and supporting documentation listed above.

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