1

Artzi, Hiba

& Elmekiesse

Tax Solutions

Ltd.

The Global Combat Against Tax Havens

and Unreported Financial Accounts

Background to open discussion

Speaker: Hagi Elmekiesse

CPA and Advocate

International Tax Partner

Artzi, Hiba & Elmekiesse – Tax Solutions Ltd.

Tel Aviv, Israel

Premier International Associates

The 2009 Annual Meeting -Paris May, 2009

2

Artzi, Hiba

& Elmekiesse

Tax Solutions

Ltd.

Artzi, Hiba & Elmekiesse - Tax Solutions Ltd. - Profile

Our team includes 15 highly experienced members, most

of them former Israeli Tax Authority’s professionals in all

tax areas, including:

International taxation

Domestic direct taxation

Idirect taxation

Social insurance

Criminal tax law

Partners:

•Ran Artzi, CPA – Managing Partner

• Ishay Hiba, CPA and Jurist – Israeli Tax Partner

•Hagi Elmekiesse, CPA & Advocate –

International Tax Partner

3

Artzi, Hiba

& Elmekiesse

Tax Solutions

Ltd.

Artzi, Hiba & Elmekiesse - Tax Solutions Ltd. - Profile

The firm specializes in providing unique and tailor

maid tax solutions to complicated tax cases. Including:

• Pre-rulings before the various tax authorities

regarding local and worldwide issues;

• Efficient tax planning (domestic and international);

• Israeli Tax Authority assessments representation – in

all tax areas;

• consulting Returning Residents and New Immigrants

on their extreme tax benefits.

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Artzi, Hiba

& Elmekiesse

Tax Solutions

Ltd.

The Global Combat - General • The battle of the developed countries against tax

havens has a long history.

• The leading “warriors” are:

– OECD:

Global Forum Working Group on Effective

Exchange of Information; and

OECD's Center for Tax Policy and

Administration.

– Leading jurisdictions – mainly the US;

– G-20

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Artzi, Hiba

& Elmekiesse

Tax Solutions

Ltd.

The Global Combat – OECD & G-20 OECD:

– 1998: OECD Report on Harmful Tax Competition (the 1998

Report).

– Exchange of information (OECD Model Tax Convention);

– Monitoring and Black List;

– OECD Agreement on Exchange of Information (2002).

G-20:

– Formation of common policies;

– Actual coordination between these leading economies;

– Currently focusing on: Switzerland, Lichtenstein, Luxemburg,

Monaco, Singapore and Hong-Kong (all recently agreed to

follow OECD standards).

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Artzi, Hiba

& Elmekiesse

Tax Solutions

Ltd.

The Global Combat - IRS IRS:

– Combat against certain financial centers;

– UBS Agreement – following IRS pressure:

Disclosure of 250 taxpayers;

2 US taxpayers were prosecuted; Possible disclosures of 52,000 additional taxpayers; Legal steps in the US against UBS; 780 million USD – fines paid by UBS;

Possible US-Switzerland treaty amendments.

– Other banks are targeted by the IRS.

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Artzi, Hiba

& Elmekiesse

Tax Solutions

Ltd.

The Global Combat –

Exchange of Information

• Growing pressure on “tax centers”;

• Exchange of information between leading economies

and “tax havens”.

• Recent parties to exchange of information agreements

- examples:

Guernsey;

Jersey;

Bermuda;

Isle of Man;

Gibraltar;

Cayman Islands;

Liechtenstein;

Andorra;

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Artzi, Hiba

& Elmekiesse

Tax Solutions

Ltd.

The Global Combat – IRS “Amnesty”

6 Months “window of opportunities”

• IRS Commissioner’s formal announcement on

voluntary disclosure (March 2009);

• Incentives to taxpayers to “step-forward”;

• Standard fines and interest payment;

• No criminal procedures;

• Crack-down on unwilling and uncooperative tax-payers

in future (September 2009 - onwards).

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Artzi, Hiba

& Elmekiesse

Tax Solutions

Ltd.

Cyprus – out of Russian “black-list”

Russia – Cyprus: New Tax Treaty Protocol (April 16, 2009)

• Recent Protocol allows Russia access to information

on taxpayers’ hidden accounts and entities in Cyprus;

• Cyprus will no longer be on Russia’s “Black List”;

• Cypriot internal law was amended accordingly –

Possible general application to other countries;

• Other treaty implications are expected to apply in 2014.

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Artzi, Hiba

& Elmekiesse

Tax Solutions

Ltd.

Israel – Disclosure and Settlements

• Israel – tax reform of 1/1/2003: world-wide tax base;

• Tax Settlements in the International Tax Division:

– 5% gross tax rate (treaty country);

or

– 7.5% (non-treaty country).

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Artzi, Hiba

& Elmekiesse

Tax Solutions

Ltd.

Israel – Disclosure and Settlements -

Trusts

• Israeli Taxation of Trusts

– Trust taxation provisions – effective 1/1/2006;

– 4 types of taxable trusts, even where only

marginal link to Israel exists;

– The various types of Trusts:

Israeli Resident Trust;

Foreign Resident Settlor Trust;

Foreign Resident Beneficiary Trust;

Trust Pursuant to a Will.

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Artzi, Hiba

& Elmekiesse

Tax Solutions

Ltd.

Israel – Disclosure and Settlements of Trusts

• Special settlements to “old” trusts (which were

created before 1/1/2006);

• 4%, 6% or 10% tax from gross assets value;

• Last day to apply for a trust settlement:

30 June 2009.

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Artzi, Hiba

& Elmekiesse

Tax Solutions

Ltd.

Israel – Significant New Tax Benefits

• Israel - a “limited” tax haven? Amendment 168:

– Benefits to Returning Residents and New Immigrants;

– Returning Residents - 10 years of residence abroad;

– Tax benefits:

10-year full tax exemption on income/gains

from foreign countries;

No reporting requirements on exempt income

or gains for 10 years;

2007 to 2009 Returning Residents – only 5 years

of residency abroad are required.

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Artzi, Hiba

& Elmekiesse

Tax Solutions

Ltd.

Israel –Tax Settlements

Tax Settlements – Current Practice

– Pre-Ruling – anonymous application allowed;

– Possible settlements in regional tax offices.

– Regional Assessing Officer has wide discretion.

– Criminal procedures may be avoided.

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Artzi, Hiba

& Elmekiesse

Tax Solutions

Ltd.

7, Menahem Begin St., Ramat-Gan 52521, Israel

Phone: 972-3-6134111. Fax: 972-3-6133113

Cell: +972-52-5565872

E-Mail: hagi@ahe-tax.co.il,

Website: www.ahe-tax.co.il