The plan for 0% VAT on new homes of up to NIS 600,000 for those who don’t perform national service has been slammed.

The maximum price for which a VAT exemption will be granted to those who have not served in the Israel Defense Forces (IDF) or civilian national service, it is believed, will change from NIS 600,000, as the Ministry of Finance announced yesterday, to a larger amount. This follows the stubborn objections of Minister of Construction and Housing Uri Ariel, and comments by the Minister of Justice, and the Attorney General that if there are insufficient new apartments in this price range then the price will change.

“The compromise presented by the Ministry of Finance for the VAT criteria is unacceptable,” said Minister of Construction and Housing Uri Ariel at the Knesset Finance Committee meeting on the housing crisis. “The compromise needs to be more egalitarian. I repeat: there will be no NIS 600,000 limit for people who did not serve, it won’t pass. Why? Because there are no such apartments, maybe a few, and, in addition, the Finance Committee, in my opinion, will not allow it.” Ariel’s comment comes after he attacked the compromise as unrealistic yesterday, following its announcement by the Ministry of Finance. Ariel also said he would be speaking to the Attorney General to emphasize that there are no new apartments for NIS 600,000 on the market.

It appears that Minister of Justice Tzipi Livni is also demanding explanations about the compromise. Livni instructed Ministry of Justice Land Appraisals Council chairperson Tal Aldrussi to check whether the data presented to the Ministry of Justice in the discussions of the zero-VAT agreement are correct and accurately reflect the reality in the market.

According to Livni, if the data are not in line with reality, “There will be no escaping changing the relevant clause.” She further said that “Encouraging and rewarding young people who bettered their country by serving in the IDF or national civilian service, is a worthy process, and is our duty. If it becomes clear that the figures presented to the Ministry of Justice, based upon which the Attorney General made his recommendation to the government, are inaccurate, and are not in line with reality, there will be no choice but to adjust the amount at which the benefit is given, without harming the benefits given those who served their country.”

Published by Globes [online], Israel business news – www.globes-online.com – on May 12, 2014

© Copyright of Globes Publisher Itonut (1983) Ltd. 2014

Israel agrees to turn American’s bank accounts over to IRS

By Niv Elis

The 2010 Foreign Account Tax Compliance Act requires int’l financial institutions to turn over all information on their US account holders.

The Finance Ministry reached an agreement on Thursday to turn information on US citizens’ bank accounts over to the United States Internal Revenue Service, in compliance with a tough US law designed to counter tax evasion.

The 2010 Foreign Account Tax Compliance Act (FATCA) requires international financial institutions to turn over all the information on their US account holders, or else face tough sanctions from the US: withholding of 30 percent of all US-based transactions.

Though many expatriate Americans don’t know it, they are required to file their income with the IRS each year with a 1040 tax form. Tax agreements signed between the US and Israel mean that Americans in Israel earning less than $97,600 a year generally don’t need to pay any additional taxes, but they are still required to file the form.

If someone doesn’t file the 1040 form, incorrectly answers the section on whether they hold foreign bank accounts with over $10,000, or fails to file the accompanying Foreign Bank Account Report form, the penalties can be monumental. The IRS can fine violators for up to 50% of the account’s maximum balance for each year of each violation.

The agreement means the US will have precise details on which foreign bank-account holders have failed to report their bank accounts and whether it was a purposeful attempt to evade taxes or an accidental oversight.

“The agreements signed with the US Treasury Department will make it easier for the necessary financial institutions to provide the information on American accounts in Israel,” said Frieda Israel, deputy supervisor for state revenue at the Israel Tax Authority, who led the negotiations with the US Treasury Department.

The agreement provided for some exemptions for small financial institutions considered to be low-risk for abetting tax evasion.

For Americans who have not played by the book, there may still be an option for coming clean and avoiding enormous fines through the Overseas Voluntary Disclosure Program; if they come clean about their mistakes and file their old taxes they can pay a lower fee.

The program, however, was designed to get people to disclose their accounts before FATCA went into effect, so it is not clear whether the IRS will continue to offer it once it has people’s account information.

Although FATCA is an American initiative, Wednesday’s agreement opened up the possibility that the US would divulge account information on Israeli citizens living in the United States. That means Israeli entrepreneurs making big bucks in Silicon Valley may yet find the Israel Tax Authority knocking on their doors, asking for a slice.

Israel is not the first country to cooperate, as 28 countries had already signaled their compliance, including Britain, Canada, Denmark, Mexico, Ireland, Norway, Spain, Germany, France, the Netherlands, Japan, Italy and Hungary.

They may have been convinced to participate following a series of high-profile disclosures after notoriously secretive banks in Switzerland, such as UBS and Credit Suisse, agreed to disclose information on their American account holders in 2013, leading to prosecutions.

As The Jerusalem Post reported in August, several Israeli banks may have already begun disclosing account holders’ information even ahead of the FATCA compliance deadline.

In December 2012, Bank Leumi sent letters to its American customers urging them to disclose their accounts. The IRS caught whiff of the warnings, and seven months later said it would no longer accept early amnesty for Leumi account holders who had reported their previous nondisclosure, according to a Forbes report.

With the compliance deadline in sight, Globes reported, US citizens withdrew $4 billion to $5b. from Israeli banks. 

 

US real estate co Extell in Tel Aviv bond offering

The New York developer owned by Gary Barnett intends to raise up to NIS 700 million.

US real estate company Extell Development Company, owned by Gary Barnett, has published a draft prospectus for an bond offering of up to NIS 700 million on the Tel Aviv Stock Exchange, via Extell Limited. The bonds are rated A2.

Extell posted a profit of $203 million in 2013, and at the end of that year had shareholders’ equity of $654 million. The Extell group is one of the largest and most active real estate developers in New York. It is the developer of the prestigious One57 project in Manhattan, a tower combining residences and a hotel and the tallest residential tower in the city. It is currently being completed, and is expected to yield revenue of $2.6 billion.

Among other assets, the company owns the 509-room W hotel on Times Square in New York, valued at $505 million.

The Tel Aviv offering will be managed by a consortium headed by Apex Underwriting and Issue Management Ltd. Law firm Shimonov & Co. and accountants Kost Forer Gabbay & Kasierer are acting for Extell.

Extell is making the offering in order to finance real estate investments in the US, chiefly in New York.

The Extell group was founded in 1989. Gary Barnett was named Most Powerful Person by the New York Observer magazine in 2013.

Prices per square foot rose in Manhattan in 2013, with igh demand for luxury apartments, Extell’s specialty. In January 2014, prices were estimated at $1,302 per square foot, 10% more than in January 2013. The average rent in Manhattan in October 2013 was $4.73, compared with $4.61 in October 2012.

Published by Globes [online], Israel business news – www.globes-online.com – on May 11, 2014

Critera set for 0% VAT on new homes

Finance Minister Yair Lapid and Attorney General Yehuda Weinstein have compromised.

The main factor entitling buyers of new homes to be exempt from VAT will be military or national service, it was agreed today in discussions between Finance Minister Yair Lapid and his top officials and Attorney General Yehuda Weinstein and his officials.

However, following lengthy discussions Weinstein refused to set criteria which did not extend to the entire population while Lapid insisted on preferential treatment for those who undertake military or national service.

Ultimately a compromise was reached. Those undertaking national service will be allowed to buy a 0% VAT apartment for up to NIS 1.6 million including VAT. Other Israelis will be able to buy a 0% VAT apartment up to NIS 600,000 including VAT.

Published by Globes [online], Israel business news – www.globes-online.com – on May 11, 2014