Why now, after five years?
Under the Indirect Taxes Law (overpaid or underpaid tax), 1968, the Israel Customs Authority is authorized to conduct post-release audits and demand the retroactive payment of import taxes in respect of goods imported several years earlier – generally up to five years retrospectively.
Such a demand may arise, among other things, from a change in the classification of the goods, a dispute concerning their value for customs purposes, the rejection of a certificate of origin, a breach of the conditions governing a conditional exemption, or other grounds.
A duty demand issued several years after the relevant imports were made may accumulate to a substantial amount. Unlike the arrangements applicable to income tax and VAT, under customs law the debt is immediately enforceable, and the filing of an objection or the commencement of legal proceedings does not automatically stay collection. In appropriate cases, it is therefore necessary to seek an arrangement with the Customs Authority suspending collection proceedings until the dispute has been determined – for example, against the provision of a guarantee or under an agreed payment plan.
Even where the Customs Authority’s substantive position is found to be justified, this does not necessarily mean that the importer must pay the entire debt. The law allows an importer to apply for an exemption from payment of the shortfall if the importer can demonstrate that complete and accurate information was provided to Customs; that the importer neither knew nor ought to have known of the shortfall; and that the goods were sold in good faith, without taking into account in the sale price the additional tax subsequently demanded.