FATCA

FATCA (Foreign Account Tax Compliance Act) is the US Internal Revenue Code framework, enacted in 2010, requiring foreign financial institutions to report on US-citizen and US-resident account holders to the US Internal Revenue Service. The framework operates through bilateral inter-governmental agreements (IGAs) under which participating jurisdictions report through their own tax authorities to the IRS.

For US citizens making aliyah and operating Israeli-domiciled accounts, FATCA reporting operates continuously regardless of Israeli tax residency. Israeli banking and brokerage institutions report US-citizen account holders to the Israel Tax Authority, which transmits the data to the IRS under the Israel-US IGA.

The structural implication is that US citizens making aliyah retain US worldwide taxation under the Internal Revenue Code regardless of Israeli tax residency. The Israeli foreign-source-income exemption applies for Israeli purposes; US worldwide-taxation obligations continue to apply for US purposes. US-citizen olim typically engage US tax counsel alongside Israeli tax counsel for integrated cross-border planning. The Foreign Earned Income Exclusion (FEIE), foreign tax credits, and the US-Israel Tax Treaty provide mechanisms for managing the integrated taxation.

The 2026 Israeli worldwide disclosure regime (effective January 1, 2026) operates alongside FATCA for US-citizen olim — the same offshore positions are now reported to the Israel Tax Authority alongside the continuing FATCA reporting to the IRS.

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