LIMASSOL – Facing revenue shortfalls during the invasion of the Gaza Strip, Israel is looking to tax Israelis who moved to Cyprus and aren’t paying, those already living there, and others who’ve moved during the war.

The Israel Tax Authority recently launched an operation to identify assets, income, and companies of Israelis on the neighboring island on which the Tax Authority believes tax should be paid in Israel, as reported by Globes.

It’s part of Israel’s Tax Authority Director Shay Aharonovich’s campaign against tax evasion and the black economy and is targeting individuals and businesses on the island who don’t report their income to Israel.

“We are focusing on activity in Cyprus because of the trend of Israelis moving there, buying real estate, and forming companies on the island,” a senior Israel Tax Authority source told the site.

Cyprus has low tax rates and has long been known as a tax haven. Israeli tax officials are scrutinizing Israelis’ ties with Cyprus, including travel activity between the countries by business executives.

Taxation of foreign companies registered in Cyprus and doing business outside it is also low, and real estate prices there have attracted many investors. It is estimated that somewhere between 10,000 and 20,000 Israelis live in Cyprus, while many more are active there in businesses engaged in fintech, investment, real estate, and foreign exchange dealing.

Tax lawyers inform “Globes” that they have recently been consulted by worried owners of companies and businesses in Cyprus who have received various kinds of approaches from the Israel Tax Authority, such as demands for declarations of assets and income there.

Cyprus is a party to some 65 tax treaties that provide for reduced withholding taxes on dividends, interest, royalties, and pensions from overseas. Israel does not yet have such a treaty with Cyprus, resulting in the Israel Tax Authority having no information on assets and income of Israelis there.

“There are discussions between the countries and good intentions, but these have yet to mature into a treaty to prevent double taxation. We are pretty much in the dark when it comes to information from Cyprus, and we want to emerge from it so that Cyprus will not be used as an illegitimate tax haven,” the Israel Tax Authority source said.