With the end of banking confidentiality, many Israelis are fleeing the long arm of the Israel Tax Authority to the tax haven of Dubai, which has no bank reporting.
Tightening tax regulations in many countries, beginning with the US, requiring banks to provide information about their customers, or face sanctions, has caused people with black money, laundered money, or unexplained money to seek friendlier banks; specifically more confidential banks.
The most extreme measure is the US Foreign Account Tax Compliance Act (FATCA), which will soon come into effect. It requires non-US banks to identify US customers and report their assets to the IRS. In line with international demands, banks across the world are requiring their customers to disclose the source of their money, so that they can provide explanations to national tax authorities. However, not every customer can provide acceptable explanations. Not everyone can explain the millions of dollars sitting quietly in a bank account in Switzerland or another country.
Among those with millions in shady money in banks around the world are Israelis who did not take advantage of the Tax Authority’s voluntary disclosure program to report the money and pay full taxes on it with no criminal proceedings taken against them. Unexpectedly, some of these Israelis have gone to Dubai. The charm of Dubai, one of the United Arab Emirates (UAE), is a negligible to zero tax policy and complete banking confidentiality.
“Dubai is attractive for businesspeople from all over the world, in part because of certain tax advantages in its unique tax system, which are intended to attract foreign investment, ” says Gideon Bar-Zakay, an accounting consultant and former senior Tax Authority official. “These are all legitimate and accepted advantages. It is not well known that the UAE has anti double taxation treaties with 70 countries, including China, Belgium Germany, Italy, Canada, Morocco, Japan, Jordan, Lebanon, Syria, Singapore, the Netherlands, Greece, Spain, and France.”
Bar-Zakay adds, “Dubai has several laws that allow it to function as a tax haven in many ways, which helps draw investment by foreign residents. For example, subject to certain conditions, it is possible to obtain a full income tax exemption, as well as a corporate tax exemption for up to 15 years. There are also exemptions from deducting tax at source and import duties.”