Foreign Bank Accounts and Assets: Reporting and Regularization

An Israeli resident is liable for tax on income from a foreign bank account and other assets outside Israel, such as interest, dividends, and rental income, and reports them in Appendix D of the annual tax return (Form 1324). In some cases, the assets themselves trigger a filing obligation — for example, when NIS 500,000 or more was transferred abroad within 12 months. The Voluntary Disclosure Procedure ended on 31.8.2026, so anyone who has not yet reported should first assess their exposure, in Israel and sometimes in the U.S. as well. Send us a list of the accounts and the relevant years, and we will check what needs to be resolved.

Clients typically reach out in one of the following situations:

• You inherited a bank account or investment portfolio abroad from a parent and are unsure what was reported in the past.

• You are a U.S. citizen living in Israel and have not filed a U.S. tax return or FBAR in recent years.

• Your bank in Israel or abroad asked about your tax residency or U.S. citizenship.

• The assessing officer inquired about a foreign account that did not appear in your annual tax return.

• You transferred NIS 500,000 or more abroad within a single year.

• You hold shares in a company registered abroad and did not attach Form 150 to your tax return.

Israel taxes its residents on income earned outside Israel as well (Section 2 of the Income Tax Ordinance). The main reporting obligations are:

• Foreign income — such as interest, dividends, gains from the sale of securities, and rental income — is reported in the annual tax return and in Appendix D (Form 1324), together with the tax paid abroad, in order to claim a foreign tax credit.

• Anyone who transferred NIS 500,000 or more abroad within 12 months must file an annual tax return for the year in which the amount was first transferred and for the following year (Section 131(a)(5v)).

• Foreign assets held by you, your spouse, and children under 18 trigger a filing obligation when their value exceeds a threshold updated annually (NIS 2,086,000 for the 2024 tax year).

• A controlling shareholder in a publicly traded foreign company, or a holder of rights in a non-traded foreign company, must attach Form 150 to the tax return.

• The assessing officer may require a capital declaration (Section 135), which also covers foreign accounts, securities, and real estate.

A new immigrant (Oleh) or a returning veteran resident who became a resident from 1.1.2026 onward must report these income items even when they are tax-exempt (Amendment 272). Details are on the page Taxation of New Immigrants and Returning Residents.

From the banks. Under the CRS standard, Israel has been receiving automatic information since 2019 on accounts held by Israeli residents in approximately 100 countries, and Israeli banks are subject to a parallel reporting obligation (Sections 135B through 135G of the Ordinance). With the U.S., a FATCA agreement has been in effect since 30.6.2014, and the banks' reporting system under it went live in September 2016. Consequently, an account that was not reported several years ago may already be known to the Tax Authority, and this affects the exposure assessment.

A U.S. citizen living in Israel reports in both countries: in the U.S. as a citizen, and in Israel as a resident. The tax treaty allows the U.S. to continue taxing its citizens (Article 6(3) of the Treaty), and the double-tax prevention mechanism in Article 26 determines, for each type of income, which country grants a credit for the other's tax. Regarding the accounts themselves, there are two U.S. reporting requirements: the FBAR, when the aggregate balance in all foreign accounts exceeded $10,000, and Form 8938, which for an unmarried individual living outside the U.S. applies from $200,000 at year-end or $300,000 at any point during the year.

A person who failed to file and did not act willfully may use the IRS Streamlined Foreign Offshore Procedures: tax returns for the last 3 years and FBARs for the last 6 years, payment of tax and interest, and a certification that the conduct was not willful. Those who qualify are not subject to penalties for failure to file or for FBAR violations. The U.S. returns are prepared by a U.S. tax representative, and we handle the Israeli side and verify that both filings present the same accounts and the same income.

Israel does not impose an inheritance tax: the estate tax was abolished in 1981, and the inheritance itself is not considered income. Nevertheless, it does have tax implications:

• From the date of death, income generated by the asset — such as interest, dividends, or rental income — is your income, and you must report it in Israel.

• When you sell the asset, the original cost and acquisition date are those of the deceased (the definitions of "original cost" and "acquisition date" in Section 88 of the Ordinance, for a decedent who passed away after 31.3.1981). This means that the appreciation during the decedent's holding period is included in your capital gain.

• The decedent's country of residence may levy an estate tax. In the U.S., for example, the estate of a person who was neither a U.S. citizen nor a U.S. resident must file an estate tax return (Form 706-NA) when the value of U.S.-situs assets exceeds $60,000.

• An heir who is a U.S. citizen or resident must report to the IRS any inheritance from a non-U.S. person exceeding $100,000 (Form 3520).

Regularization is still possible, but without the protection the procedure provided. The Voluntary Disclosure Procedure ended on 31.8.2026, and as of 11.10.2026 no new procedure has been published. Therefore, amended returns and tax payments are not currently accompanied by an undertaking to refrain from criminal proceedings. The available options and associated risks are detailed on the page Voluntary Disclosure and Regularization of Assets After 31.8.2026.

Before that, two additional questions are examined: whether the income was taxable in Israel at all — for example, during an Oleh's exemption period — and whether the same accounts are also subject to U.S. reporting obligations, so that the regularization in both countries is consistent.

1. Initial meeting under attorney-client privilege. Bring annual account statements, tax returns from Israel and abroad, and — in inheritance cases — the inheritance order or probate order.

2. We map every account and asset by year: balance, income, ownership, and what has already been reported in Israel or abroad.

3. We calculate the tax for each year, including foreign tax credits and linkage differentials and interest.

4. We choose a course of action: amended returns, a settlement agreement with the assessing officer, or representation where an audit has already been opened. For U.S. citizens, we coordinate the timeline with the U.S. tax representative.

5. We prepare a document explaining the source of funds, in case the Israeli bank requests one.

Cases in this field are handled by Adv. and CPA Shlomi Vaknin and his firm's team. Shlomi, the firm's founder, has been a certified public accountant since 2000 and an attorney since 2008, and served for nearly a decade as a national supervisor in the Professional Division of VAT at the Israel Tax Authority. In cases of this kind, he reviews both the tax calculation for each year and the arguments vis-à-vis the assessing officer.