Israel's Voluntary Disclosure Window Closed on August 31: What It Offered an American Heir With Unreported Israeli Rent, What the Ordinance Still Allows Without It, and Why an Israeli Return That Was Never Filed Has No Expiry Date

This is orientation, not legal or tax advice. It maps what exists and the questions to take to a licensed professional. It does not tell you what to do about your own estate or taxes.

The procedure opened on a Monday in late August 2025 and closed on a Monday in late August 2026, and in the year between, an American who had been collecting rent on a parent's apartment in Israel without telling anyone in Israel could have fixed that with a form. The form was online, it accepted a passport instead of an Israeli identity number, and it came with a written promise from the Israel Tax Authority that a truthful filer would not face a criminal case. That promise expired on August 31, 2026. As of the day this page was checked, no extension had been announced, and the Authority's own English page still states the closing date without qualification.

This page is for the heir who did not use it, and in most cases did not know it existed. The scene is common enough to describe once. A parent died in Israel two or four or six years ago. The succession order issued, the apartment in Netanya or Rishon LeZion was registered to the children, and rather than sell into a bad month, the family rented it out. A sibling in Israel signs the lease, the tenant pays into an Israeli account, and once a year a share is wired to the heir in New Jersey. The rent is NIS 8,000 a month. Nobody in Israel filed anything, because the sibling assumed the exemption covered it, and nobody in America filed anything, because the money was "from the inheritance."

Both assumptions were wrong, and the two mistakes belong to two different tax systems that do not talk to each other about this. The American side of a late-reported inheritance has its own page. This one is the Israeli side: what the window that just closed would have done, what can still be done, and which Israeli clocks are running.

What the procedure was, and who it was built for

On August 25, 2025, the Tax Authority published a directive titled Voluntary Disclosure Procedure – Temporary Order, approved by the Attorney General, in effect until August 31, 2026. The design was familiar from three earlier rounds, in 2011 to 2012, 2014 to 2016, and 2017 to 2019: a taxpayer who had not reported income comes forward before the Authority finds them, files, pays the tax, and in exchange the state undertakes not to prosecute the tax offences that the non-reporting involved. Two things about the 2025 version mattered for the readers of this site.

The first is that it was written to include foreign residents, and built to let them in. The English service page addresses "Israeli residents and non-residents" in its first sentence. The application ran through an online form only, and a foreign resident with no Israeli tax file was told to first register for a number in the Authority's foreign-resident system, then apply. A passport was an accepted identity document for an applicant without an Israeli card. This was not a program designed only for Israelis with a Swiss account; an heir in New Jersey with a Netanya apartment was inside its intended population.

The second is the green track. The procedure split cases by size. Large or complicated disclosures went to the Regular Path, an assessment agreement negotiated with the local assessing office. Small ones went to the Green Path, which was simply the filing of first-time or corrective returns containing the unreported income. Residential rental income in Israel or abroad up to NIS 250,000 a year qualified for the green track. So did a financial account outside Israel with a balance under NIS 4 million at the end of 2014 and no deposits since, which describes many inherited accounts. The service page adds a detail that could have been written for the scenario above: an abridged declaration for rent in the 10 percent tax path would be referred straight to the civil office for processing. In practice, an heir with NIS 96,000 a year in rent, or a share of it, was looking at a short online application, a set of late annual rent declarations, 10 percent of the gross plus interest and linkage, and a letter saying the criminal file was closed before it opened.

What it gave that nothing else gives

The tax itself was never the point of the procedure. The Authority was explicit that the procedure offered no discount, no reduced rate, and no offsetting of losses or credits against the disclosed income. The applicant paid what the law always said was due. What the procedure added was three things a plain late filing does not carry.

The first is the written undertaking not to open criminal proceedings for the offences listed in the procedure's Appendix A, which reaches the sections of the Ordinance an unreported landlord actually violates. The second is the shield on information: if the Authority rejected an application, it could not use what the applicant had disclosed in any criminal or civil proceeding against them. A taxpayer could therefore describe the whole situation without the description becoming the evidence. The third is the routing. Investigations screened the application, the Unreported Assets Department assigned the path, and the civil office processed the returns. The filer did not have to find the right desk in a foreign tax authority in a foreign language; the procedure did the finding.

The conditions were the mirror of the benefits. The disclosure had to be truthful, complete, and in good faith. The applicant could not have been convicted of a tax offence, paid a ransom for one, or used an earlier procedure. No examination or investigation could already be open, by the Authority, the police, or another enforcement body, against the applicant, a spouse, or a controlled company. And the Authority could not already hold the information, whether from its own files, another government body, the press, or a court record in Israel or abroad. Unlike the 2017 round, there were no anonymous applications: the name went on the form from the start. A person who qualified got everything; a person who was already on a list got nothing and had signed their name to say so.

What the Ordinance still allows, now that it has closed

The procedure was an administrative instrument laid over the statute. Its expiry took the instrument away and left the statute exactly as it was, and the statute has always allowed a person to file a return late or correct one that was wrong. There is no rule that an Israeli return for 2022 cannot be filed in 2026. What changed on September 1 is the terms.

On the civil side, the terms are the ordinary ones. An individual whose residential rent exceeded NIS 5,654 a month, the exemption ceiling frozen at that figure for 2024, 2025, and 2026, owed tax in one of three tracks, and the tracks are mapped on the renting-out page. The one that matters for a late filer is the 10 percent track of section 122, because its condition is a payment date: the tax is due by January 31 of the year after the rent was received, and after that date it carries interest and linkage differentials. For NIS 8,000 a month, the choice in an ordinary year was between 10 percent of NIS 96,000, which is NIS 9,600, and the marginal track, where the taxable portion is twice the amount above the ceiling and the first bracket is 31 percent. For most heirs the 10 percent track was cheaper, and it remains available late, with the arrears cost attached. Whether a late payment still counts as an election of the 10 percent track for a closed year, rather than defaulting the landlord to the marginal track, is a question that has been litigated and is exactly the kind of point to put to an Israeli tax adviser before filing, not after.

Two further civil consequences exist and were largely absent inside the procedure. Section 191 lets the assessing officer add a deficiency penalty where the tax that should have been paid exceeds the tax that was declared by more than half: 15 percent of the shortfall, or 30 percent where the officer has reasonable grounds to believe the shortfall was intended. A landlord who declared nothing has, arithmetically, a deficiency of the whole amount. Whether the penalty is imposed on a self-corrected file is a matter of the officer's discretion and the taxpayer's explanation, and the Ordinance itself lets the Director reduce or waive interest and penalties where the delay was not within the taxpayer's control.

On the criminal side, the sections did not go anywhere. Section 216 makes failure without sufficient reason to file a return on time an offence carrying up to a year. Section 217 makes an incorrect return without reasonable excuse an offence carrying up to two years. Section 220 covers acts done with intent to evade and carries up to seven. Section 226 adds that a criminal proceeding does not cancel the civil debt. The practical reality, which any Israeli practitioner will confirm, is that a foreign heir who comes forward on their own with a rent file and pays is not the population those sections were written to reach, and that the Authority's prosecutorial resources go elsewhere. But the practical reality is not a written undertaking, and the difference between the two is what the procedure sold for a year and no longer sells.

Why the clock on an unfiled Israeli return never started

Heirs sometimes ask whether an old year has simply gone stale in Israel. The Israeli rule resembles the American one, and the resemblance is not comforting.

Section 145(a)(2) gives the assessing officer four years to examine a return and replace it with a best-judgment assessment, and the four years run from the end of the tax year in which the return was delivered. Practitioners are consistent that this is measured from the actual filing, even a filing years late. A return that was never delivered has never started that period. For a year with no return, the Authority's ability to assess has no closing date, and the first move is available to whichever side takes it. Once a return is in, the clock finally begins, and four years later that year closes, which is an argument for filing that has nothing to do with amnesty.

There is one Israeli clock that runs in the heir's favor, and it belongs to the deceased rather than to the heir. Section 120(a) makes the legal representative of a person who has died, a term the Ordinance defines to include an heir and an estate administrator, responsible for the deceased's tax for the year of death and the three years before it, up to the value of the estate. If the parent had an unreported rental or an undeclared account during life, the exposure that passes to the heirs is limited to those four years and capped at what the estate was worth. Income the estate earned after death is a different matter: section 120(b) treats it as the heirs' own income, by their shares, from the day of death. The rent collected since the funeral was never the parent's problem. It is the heirs', and it is not capped.

How the deceased's debts, tax included, reach an heir living abroad, and how the creditor-notice procedure under the Succession Law limits that reach, is mapped on the inherited-debts page.

The American return does not know the Israeli one was fixed

A correction in Israel is a correction in Israel. Nothing about it reaches the Internal Revenue Service, and nothing about it fixes what was left off a Form 1040.

A US person owes American tax on rent from a Netanya apartment in the year it is received, on the net figure after expenses and a mandatory depreciation deduction, whatever Israel did or did not collect. The Israeli tax, once paid, is creditable on the American side, but a foreign tax paid in 2026 for rent received in 2023 raises the timing question of which year's credit it belongs to, and an heir who never reported the rent in America has an amended return to file there before the credit can be claimed at all. The interaction between the 10 percent gross track and the American net computation, and why the credit covers less than heirs expect, is on the renting-out page. The American reporting of the inheritance itself, the account the rent lands in, and the paths for coming forward late in Washington are on the late Form 3520 page and the FBAR page.

The two corrections are done by two different professionals, in two languages, and the order matters. Most cross-border practitioners will want the Israeli figures settled first, because the American amended return needs the Israeli tax actually paid, and the dates it was paid, to compute the credit.

Will there be another window

The honest answer is that nobody outside the Authority knows, and the pattern of the last fifteen years cuts both ways. There have now been four procedures since 2011, which suggests a fifth is possible. Each has been narrower than the one before, and the 2025 procedure removed the anonymous stage that made the 2017 round usable for people who wanted to test the water first. Several firms described the 2025 round as likely the last of its kind. That may be marketing, and it may be right.

What is visible is that the legal environment around unreported rent is tightening independently of any amnesty. The Finance Ministry has been trying since 2024 to require reporting of all residential rent, including rent under the exemption ceiling, and to stop indexing the ceiling; the measure passed a first Knesset reading inside the wartime budget, stalled in the Finance Committee, and the Ministry has said it intends to resume from where it stopped. In September 2026 the Housing Ministry published a plan recommending a register of every residential lease. None of that is law today. All of it points the same direction, and a landlord who is not in the Authority's system now will be easier to find in whatever system comes next.

What to gather this week

The correction is a professional's job, in the sense that an Israeli tax adviser or accountant should choose the track, compute the arrears, and write whatever explanation accompanies a late file. The heir's job is to reconstruct what the adviser will need, and most of it exists.

The lease or leases, with dates and monthly rent, for every year since the apartment was registered to the heirs. Bank records showing where the rent was paid and by whom it was received, particularly if a sibling in Israel collected it, because the question of whose income it was in Israel turns on the registered ownership and the shares, not on whose account it passed through. The succession order and the Tabu extract showing the registration date and the shares. Any Israeli tax file that already exists for the heir or the parent, with its number. The parent's last returns, if the parent filed, and whatever the family knows about income the parent did not report, because section 120(a) puts the four years around the death on the heirs' account. And a written chronology, dated, of when the heir first understood there was an Israeli filing to make.

Then the heir calls someone who does this for a living in Israel, and separately someone who does it in America, and lets the Israeli one go first.

The procedure was published, as it happens, on the first day of Elul, and it closed in the same month a year later. The Authority did not choose the dates for their meaning, and the page will not pretend it did. But the logic of the thing was old before the Authority borrowed it: the person who comes forward before being called is treated differently from the person who is found. That logic did not expire on August 31. Only the written guarantee of it did. An heir who files now is asking a civil servant to apply it anyway, with a dated account of what happened and the tax attached, and in the ordinary run of these files that is what the civil servant does. An heir who waits is leaving the year open in a system that, unlike the American one, has just spent twelve months teaching itself how to process exactly this case.