Israeli Banks to Require Foreign Clients to Declare Tax Compliance in Country of Residence (12/18/14; 12/20/14)

Dave Wolf reports on this firm's site the following: Foreign Clients of Israeli Banks Are Asked to Prove Tax Compliance in Home Country (12/18/14), here. Excerpts:

The Bank of Israel recently sent Israeli banks a draft procedure requiring banks to receive from their foreign clients a declaration that they have paid the required tax on the income in their Israeli bank accounts in their country of residence. 

In general, under the draft legislation, the procedure requires that every foreign resident customer (both new and existing ones) will have to present data about the source of their wealth and income, and declare that he has paid the legally required taxes in their country of residence. In addition, the client is required to sign a consent to waive their right to bank secrecy with respect to any other banking jurisdiction. 

The Bank of Israel also allows the banks not to open an account for foreign residents who do not provide all the required data and to freeze an account or refuse banking services in cases that expose the bank to the risk of violating overseas law. 

The banks have been forced to require such declarations from their US customers already as part of implementation of the FATCA rules.

Note that, as presented, it requires the declaration only for the country of residence and does not require the declaration for the country of citizenship.  Strange.

Addendum 11/20/14 9:30 AM:

A reader emailed me to state that the requirement for information about residence only is not strange because most countries tax by residence.  Of course, Israel is well aware that the U.S. taxes noncitzens by residence and citizens by citizenship.  Here was my response to the reader (as slightly modified to present here).

I knew that most countries tax on residence – at least that is what the posters of comments say.  But, if the bank is asking for place of residence it would seem it could have asked also for place of citizenship and enter that information in each bank's database.  Pretty simple one to add (might have to have multiple citizenship fields (relational database with one (the name) and many (the citizenship fields)).  Pretty easy database tweaking.  (Note also that, depending on definition of residence, can have multiple residences as well and that can be handled easy in a relational database.)  But, if the bank doesn't ask for the raw data and the bank thereafter realizes that it should have asked about citizenship as well, then it is a ton of trouble to gather that additional data.  Particularly when it could have been acquired the first time and easily input.