After weeks of negotiations and prodding, Knesset Monetary Committee Chairman Moshe Gafni reached a compromise with the Finance and Justice Ministries whereby gemachim can continue to function without reporting the activities of United States clients to the United States authorities under the aegis of the Foreign Account Tax Compliance (FATCO) agreement between Israel and the United States.
According to the agreement, gemachim will function as “institutions for public benefit” exempted from the FATCO agreement. This was to be accomplished in three ways.
Small gemachim which receive no deposits over fifty thousand dollars and whose assets were never more than fifty million dollars could declare this effect on the 15th of July. Larger gemachim are to register themselves as non-profits and declare that they are active public institutions, while gemachim already registered as non-profits and active public institutions are to merely provide confirmation that they submitted reports to the tax authorities with a report for the 2015 tax year.
However, exempting gemachim from FATCO will not put them completely in the clear as Israel is involved in creating its own legislation to put gemachim under greater scrutiny.
Gafni complained that Israel signed the FATCO agreement without considering the disastrous effect mountains of superfluous paper work would have on gemachim.
David Steger – Matzav.com Israel