On August 25, 2025, the Israeli Tax Authority published a new Voluntary Disclosure Procedure, granting taxpayers an opportunity to regularize previously unreported income and assets – including digital assets – and obtain immunity from criminal proceedings. The procedure, in effect until August 31, 2026, is accompanied by a detailed implementation directive regulating its practical application. After years without a formal voluntary disclosure framework, and following extensive preparation by the Tax Authority and the State Attorney’s Office, this appears to be the very last opportunity available to those who have not yet rectified their reporting and tax obligations.
Who is Eligible?
The procedure applies to individuals, businesses, trusts, corporate officers, Israeli residents and foreign residents with undeclared income or assets. The criminal immunity granted under the procedure covers a wide range of tax offenses, including violations of the Income Tax Ordinance, the Real Estate Taxation Law, the VAT Law, the Customs Ordinance, the Law for the Reduction of Cash Usage, and others. It also applies to money laundering offenses derived from such tax offenses, but not to income originating from unlawful activity.
Unlike previous frameworks, the new procedure does not allow for anonymous applications: the applicant’s identity will be disclosed to the Tax Authority from the outset.
Conditions for Approval
To be accepted, an application must meet several conditions, including: full and bona fide disclosure; the applicant has not been convicted of a tax offense, has not paid a monetary settlement for a tax offense, and has not submitted a previous voluntary disclosure request; prior to submission, no investigation or review has been initiated by the Tax Authority or another enforcement authority in connection with the relevant tax offenses, including in respect of the applicant’s spouse, controlled companies, or partners; and no material information relating to the request is in the possession of governmental authorities, published in major media, or included in civil or criminal proceedings in Israel or abroad.
If an application is not approved, the Tax Authority will not use the information contained in it for criminal or civil proceedings, unless the disclosure was not truthful, complete, and bona fide, or if the tax due under the procedure was not paid.
- Disclosure Tracks
As in previous voluntary disclosure programs, the procedure offers two main tracks:
Regular Track: A tax assessment agreement with the assessing officer, available for all types of applications, with no monetary limitation. - Green (Expedited) Track: Simplified and faster, designed for relatively lower amounts:
a. Foreign financial assets with a balance as of December 31, 2014 not exceeding NIS 4 million.
b. Rental income from residential property in Israel or abroad not exceeding NIS 250,000 per year.
c. Income from digital assets not exceeding NIS 500,000 for the entire disclosure period, with total digital asset holdings as of December 31, 2024 not exceeding NIS 1.5 million.
Digital Assets, Trusts, and Reliefs
For the first time, the procedure expressly addresses digital assets. Applicants must disclose the public addresses of their digital wallets and report asset balances. The implementation directive also provides for tax payment under a dedicated framework for profits derived from digital currencies.
The directive includes specific instructions for trusts, emphasizing that criminal immunity applies only to the applicant. Accordingly, additional parties such as the settlor, beneficiary, or trustee should also be included as co-applicants in order to benefit from immunity.
The directive further clarifies that if the assessing officer is satisfied that the source of the undeclared capital constitutes income outside the Israeli tax base, or does not constitute taxable income (e.g., inheritance, gifts, or Holocaust survivor compensation), no tax will be imposed on the principal.
Interest & Linkage Differentials, Penalties, and Limitations
Unlike prior voluntary disclosure programs, the current procedure does not provide relief from interest or linkage differentials on unpaid taxes, and it further allows the imposition of financial sanctions and penalties, including deficiency penalties (though there is discretion to reduce or waive these in certain circumstances). The procedure also stipulates that, for purposes of offsetting losses and foreign tax credits, the disclosure years will be treated as a “closed box.” In addition, the deduction of representation fees is limited to 50%, may firstly be offset against financial income, with no carryforward to subsequent years, and deductible input VAT on such fees is likewise limited to 50%.
