On April 12, 2012, the Israeli media reported that Bank of Israel Governor Stanley Fischer is considering asking the cabinet to reach a tax agreement with the United States to calm Israeli banks about strict new U.S. tax regulations on Americans living abroad.
The U.S. Foreign Account Tax Compliance Act takes effect at the beginning of 2013. FATCA requires that banks throughout the world report Americans' financial activities to the Internal Revenue Service. FATCA threatens severe sanctions against banks that do not adhere to its requirements, namely withholding 30% on payments to any such banks and/or their clients.
Bank Leumi has already told its American clients that they must declare by the end of April that they have reported their bank accounts to the U.S. tax authorities. Leumi warned that their Israeli accounts would be frozen at the beginning of May if they failed to do so.
Bank Hapoalim, too, has asked customers who are U.S. citizens to declare that they are reporting properly to the IRS. It seems some Israeli banks have even asked such customers for documentation that they are reporting properly to the U.S. authorities.
According to current estimates, more than 100,000 U.S. citizens live in Israel.
As a major recipient of U.S. defense, national security, and foreign policy support, Isarel cannot afford to irritate the U.S. for not cooperating on international tax enforcement.
For more information see Israel Considering FATCA Deal with the U.S.: report, International Advisor, http://www.international-adviser.com/news/tax---regulation/israel-consid...