The Income Tax Ordinance (Section 221) and the Value Added Tax Law (Section 121) provide that a person who is suspected of committing a tax offense, or who has already been indicted, may apply to pay a monetary settlement (Kofer) in exchange for the termination of the criminal proceedings relating to the alleged offense.
An application for a monetary settlement is submitted to the investigating authority, which prepares a recommendation for consideration by the Monetary Settlement Committee. The application and the recommendation are then referred to the Committee, which has discretion to approve or reject the request based on a range of relevant considerations.
A request for a monetary settlement may be submitted during the investigation, even before it has concluded. However, filing the request at too early a stage may have significant legal consequences. For example, an application submitted while the investigation is still ongoing may be treated as an initial admission of responsibility in the criminal proceedings and may also constitute an admission for purposes of related civil proceedings.
If the Monetary Settlement Committee approves the request, it will determine the amount payable. In recent years, the settlement amount has generally been approximately 30% of the unpaid tax.
It is important to note that payment of a monetary settlement does not erase the underlying conduct that gave rise to the criminal investigation. The Committee may also require the applicant to undertake not to commit a similar offense for a specified period, not exceeding three years.
Such an undertaking is recorded in the Israeli Criminal Register pursuant to the Criminal Register and Rehabilitation of Offenders Law, 1981. Accordingly, the fact that a monetary settlement has been imposed may be recorded as part of the individual’s criminal record.
