Israeli Tax Changes Influence New Immigrants

New Immigrants|Senior Returning Residents|Israel|Tax Authority

Dr. Avi Nov, Adv. 
August 2015

The Israeli Tax Authority is planning to abolish part of the tax benefits available to New Immigrants and Senior Returning Residents (Israelis who qualify for the same benefits as returning expatriates). The Israeli Tax Authority provides in a draft law (The 2016 Economic Arrangements Bill) that New Immigrants and Senior Returning Residents will have to report on their assets and income derived abroad. If the law comes into force, it will most likely apply to New Immigrants and Senior Returning Residents arriving in Israel from January 2016 and onwards.
The Tax Benefits
The basic tax benefits currently available to New Immigrants and Senior Returning Residents are based on provisions of a reform plan from 2008, which was intended to attract New Immigrants and Senior Returning Residents. In the seven years since this important tax reform was adopted, there have been several attempts to change the reporting exemption, the last of which was published in the 2016 Economic Arrangements Bill.
The Reporting Exemption
Currently, New Immigrants and Senior Returning Residents are exempt from reporting their income and assets for the first 10 years after their arrival and being residents of Israel. The new reporting obligation will not deprive New Immigrants and Senior Returning Residents of existing tax exemptions, which currently apply to income of all types, including business income, interest, dividends and royalties, as well as capital gains from the sale of assets abroad for the first 10 years after their arrival and being residents of Israel.
The Proposed Reporting Obligation
The proposed reporting obligation applied to New Immigrants and Senior Returning Residents, if enacted, would take effect in two stages. The first would apply from the date of arrival of New Immigrants and Senior Returning Residents to the end of the following tax year, during which reporting would be at the request of the Israeli Tax Authority pursuant to a tax agreement. After that period, all New Immigrants and Senior Returning Residents would be required to submit a report of their assets and income abroad without being asked.
Time to Tax Planning
It appears now that the new law that would have required New Immigrants and Senior Returning Residents to report their foreign income and assets will not be included for now in the supplementary legislation to the state budget, after Immigrant Absorption Minister expressed opposition to the proposal. However, the Israeli Tax Authority, which has been determined on cracking down foreign-earned income and assets, is still firm to win passage of the reporting obligation, if not through the Economic Arrangements Bill then with a dedicated law. In any case it will be wise for New Immigrants and Senior Returning Residents to seek tax planning advice and strategies.
See also: 
Summary of tax benefits to new immigrants and returning residents 
Update on Israeli Tax Benefits for Returning Residents and New Immigrants
 
Dr. Avi Nov Law Offices, Israeli & international tax law 
 
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