Form 5329 — Personal Details and Income Source Declaration

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If you have received a demand to file Form 5329, "Declaration of Personal Details and Income Sources in Israel and Abroad" — beware. You are likely on the radar.

This Tax Authority return, requiring you to report personal details and income sources, is another tool used by the Authority to track tax evaders. The form is sent by mail by the Tax Authority's intelligence division to citizens who do not have files with the Authority and are suspected of concealing income due to information and suspicious indicators, such as: frequent trips abroad during the year, ownership of multiple residential apartments with no reporting of rental income, ownership of an undeclared bank account abroad or an Israeli bank account where untracked transactions were carried out, or information received about tax evasion.

On Form 5329 you are required to provide the Tax Authority with details about your and your spouse's income sources in Israel and abroad, including workplaces, shares in companies, ownership of real estate and vehicles, bank accounts, and more. Form 5329 is also used by the Tax Authority to request the opening of a self-employed or withholding file for salaried employees. The information submitted on the return is a central pillar in the decision whether to proceed with investigation proceedings.

Handling Form 5329

Recently, concerned citizens have approached our firm after receiving demands to file Form 5329 from the income tax intelligence division. The purpose of the demand, among other things, is to locate "black capital" of Israeli residents — that is, income produced or generated in or outside Israel that was not reported to the Tax Authority.

The demand was sent to citizens with active travel records in and out of the country who stay abroad more than 90 days a year, as well as to those whose tax-authority records show ownership of several real-estate assets and who may therefore be obligated to report and pay tax on rental income. It is also sent to taxpayers recognized by the Tax Authority as long-term returning residents or new immigrants; to people whose bank accounts show unusual deposits and withdrawals; and to those about whom information was received via the "tip line."

Read our full article: Rental Income Taxation — the Three Tracks in Israel →

Read our full article: Foreign Bank Accounts and Assets Abroad — What the Tax Authority Already Knows →

How to Handle the Tax Authority's Inquiry

The information submitted on Form 5329 will be examined by the Tax Authority and will be a central factor in the decision whether to continue inquiry and investigation, whether to take additional steps to verify the information (such as inviting the taxpayer to an interview), or alternatively whether to close the file against you if it is decided there is nothing to the information.

If the taxpayer does not respond to the letter and does not return Form 5329, or in cases where the nature of the information so requires, the Tax Authority may conduct an external audit of the taxpayer. The Tax Authority may already hold information about your undeclared income. Therefore, it is important to fill out the form carefully and accurately and to receive professional advice from CPAs who came from the Tax Authority and are knowledgeable in this area of tax law regarding the possible courses of action in handling the matter before the tax authorities.

Read our full article: Income Tax Assessment Hearings — Prepare in Advance →

Read our full article: Capital Declaration — Preparation and Filing →

Form 5329 — New Immigrant or Returning Resident

For years, a new immigrant and a "veteran returning resident" (as defined in section 14 of the Ordinance) enjoyed an exemption from reporting: under Amendment 168 to the Ordinance, they were not required to file a return on their capital and assets outside Israel, nor to report income produced outside Israel or originating from assets outside Israel (sections 134B and 135(1)(b)), for ten years from the date they became Israeli residents.

Please note — the reporting exemption has been cancelled. Amendment 272 to the Ordinance (published in April 2024) provides that anyone who became an Israeli resident for the first time, or a veteran returning resident, from 1 January 2026 must report their income and assets outside Israel from the first year. An important distinction: the tax exemption on foreign income under section 14 was not cancelled — only the exemption from the duty to report. Those who became residents before 2026 generally continue to enjoy the reporting exemption until the end of the ten years. In any case, if you received Form 5329 and are a new immigrant or returning resident — get advice before you respond.

Read our full article: Relocation and Severing Israeli Tax Residency — and Returning-Resident Status →

What Happens If Unreported Income Is Found? The Compromise Fine as a Way to Avoid Criminal Proceedings

Form 5329 is the start of an inquiry. If at its end the Tax Authority concludes that income was concealed, the taxpayer may face criminal proceedings — not only payment of the tax and civil penalties.

One of the tools for avoiding that is a compromise fine (kofer): the taxpayer asks to convert the criminal proceedings into a payment of money, in addition to the tax itself. The request is submitted to the Tax Authority's compromise-fine committee, which considers it according to the circumstances — the scale of the concealment, whether it is a first offense, and the taxpayer's cooperation.

Timing matters: at the stage of the demand for the form there is not yet a formed suspicion, so the committee does not consider requests at this stage. The compromise fine becomes relevant only if the inquiry progresses to an investigation. That is exactly why how you answer the form affects what happens next — and why, in the next section, we recommend considering voluntary disclosure as well, before you respond.

Preventive Action — Voluntary Disclosure

Proper preparation in advance may lead to settling the debt with the assessing officer. Early approach to the Tax Authority through a CPA is essential and prevents distress, even when undeclared amounts are small. One way to avoid criminal proceedings is through the civil procedure of voluntary disclosure. A voluntary-disclosure application allows anyone who has not reported income in Israel or abroad to confess and pay the tax debt and potentially receive criminal immunity (subject to procedural conditions).

Voluntary disclosure is a complex procedure whose purpose is to provide taxpayers with a renewed opportunity to pay the tax they lawfully owe while avoiding criminal proceedings. Moreover, the taxpayer public should understand that this is a worthwhile path. Please note: the 2025 voluntary disclosure procedure ended on 31.8.2026; the right course today depends on the circumstances of the file, so get advice before approaching the Tax Authority.

Read our full article: Voluntary Disclosure — the 2025 Procedure and the Situation Since It Ended →

In today's global era, with information exchange between tax authorities and a drastic reduction in banking confidentiality, the Tax Authority has the full means and ability to reach any bank account in Israel and abroad. Therefore, it is undoubtedly worthwhile for the taxpayer to settle their undeclared income within the voluntary disclosure framework. We recommend consulting a CPA expert now to be prepared for any move before the authorities.

In Summary: How to Handle Form 5329

Because receiving Form 5329 means there is a suspicion of tax offense and potential for a criminal investigation against you, it is highly recommended to contact Hager-Alperowitz & Co. CPA firm immediately upon receipt. Our firm has five offices across Israel (Ashkelon, Sderot, Petach Tikva, Jerusalem and Kiryat Shmona), and our experienced CPAs will advise you how to file Form 5329 in the best way and represent you in discussions with the assessing officer, aiming to sign an assessment agreement quickly that settles all liabilities on the file.

The above article does not constitute a recommendation, professional advice or a legal opinion. If you have any questions, you are welcome to contact us — we will be happy to advise, accompany and represent you before the Israeli tax authorities.

Kind regards,
Hager-Alperowitz & Co. — Certified Public Accountants