Dr. Avi Nov, Adv.
Are the Israeli tax incentives for Olim and Toshavim Hozrim about to end? It is true that the Israeli government is planning to change certain tax rules in order to close loopholes and make tax planning more difficult. The new tax rules are proposed in The Israeli 2013 Economic Arrangements Bill. How will these new Israeli tax rules have an effect on Olim and Toshavim Hozrim?
Toshav Hozer and Olim
Israeli tax law currently provides that new residents (Olim) and senior returning residents (Toshav Hozer Vatik) enjoy a 10-year exemption from Israeli tax on overseas income and gains. For more details, see: Summary of tax benefits to new immigrants and returning residents.
Reporting to the Israel Tax Authority
In addition to the tax exemption, Olim and Toshav Hozer Vatik are also exempt under current law from reporting overseas income and gains as well as overseas assets. However, the 2013 Economic Arrangements Bill proposes to change this rule and require Olim and Toshav Hozer Vatik to report to the Israeli Tax Authority overseas income and gains as well as overseas assets.
Be aware that the 2013 Economic Arrangements Bill does not abolish the tax exemption, but only the reporting exemption. This means that Olim and Toshav Hozer Vatik will continue to be exempt from tax on overseas income and gains, but will have to report such income and gains to the Israeli Tax Authority on their annual tax returns.
The 2013 Economic Arrangements Bill proposal that may require Olim and Toshav Hozer Vatik to report overseas income to the Israeli Tax Authority is said to be a result of pressure from the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes. However, it remains to be seen what exactly will be enacted. I believe that the reporting obligation would be altered by the Knesset.
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