The following is a summary on the issue of Israeli Residency for tax purposes based on the guidance of the International Tax Division of the Israel Tax Authority.
Criteria for Individuals to be tax resident
The following is the criteria for Individuals to be considered Israeli Residency for tax purposes, i.e. the legal provisions that determine whether an Individual is to be considered as an Israeli resident for tax purposes.
An Individual is considered an Israeli Residency for tax purposes if his center of life is in Israel.
As an assumption (that may be refuted both by the individual and by the Assessing Officer), the center of an individual's life during a tax year is in Israel, if:
(a) during the tax year he spent183 or more days in Israel, or (b) during the tax year he spent 30 or more days in Israel and the total period of his stay in Israel in the tax year and in the two years before it was 425 days or more;
For purposes of this paragraph, "day" includes part of a day;
The Israeli Tax Code
The relevant part of the definition of residence in the Israeli tax code:
""Israel resident" or "resident"
(a) in respect individuals – a person, the center of whose life is in Israel, and
the following provisions shall apply to this matter:
(1) in order to determine the place that is the center of a person's life the totality of his family, economic and social ties shall be taken into account, including inter alia:
(a) the place of his permanent home;
(b) his and his family's place of residence;
(c) his regular or permanent place of business or the place of his permanent employment;
(d) the place of his active and substantive economic interests;
(e) the place of his activity in organizations, societies and various institutions;
(2) it is a assumed that the center of an individual's life during a tax year is in Israel –
(a) if during the tax year he spent 183 or more days in Israel;
(b) if during the tax year he spent 30 or more days in Israel and
the total period of his stay in Israel in the tax year and in the
two years before it was 425 days or more;
for purposes of this paragraph, "day" includes part of a day;
(3) the assumption in paragraph (2) may be refuted both by the individual and by the Assessing Officer;………
Criteria for Entities to be considered a tax resident
A company or any other body of persons will be considered an Israeli resident if (a) it incorporated in Israel, or (b) its control and management are activated from Israel.
However, the control and management test does not apply for
a body of persons, controlled and managed in Israel by an individual who became an Israel resident for the first time or is a veteran returning resident, as said in section 14(a) and ten years have not yet passed since he became
an Israel resident as aforesaid, or by any person on his behalf, on condition that that body of persons would not be an Israel resident if the control and management of its business were not by a said individual or by a person on his behalf, unless the body of persons requested otherwise.
Additionally, in respect of trusts, if the beneficiary and/or the creator considered an Israeli resident, then, in some cases, the trust will be treated as an Israeli resident.
Dr. Avi Nov Law Offices, Israeli & international tax law
*this article is intended for informative purposes only and is in no way to be construed as tax advice or a legal opinion