Israel new Case Law on Tax Residency

Supreme Court|Israel Tax|Israeli resident

Dr. Avi Nov, Adv. 

June 2014 

The Israeli Supreme Court ruled recently that an Israeli who resides abroad can be considered for Israeli tax purposes as a person whose center of life is not in Israel, even if his family lives in Israel (Kfar Saba Assessing Officer vs Michael Sapir, Civil Appeal 4862/13). 

The court by judges Esther Hayut, Hanan Melcer, and Uzi Vogelman rejected an appeal by the Israel Tax Authority against an Israeli who lives in Singapore. His dispute with the Israel Tax Authority was over the question where the center of his life is (Israel or Singapore). The Supreme Court affirmed the ruling of Tel Aviv District Court Judge Altuvia Magen. 

See also:
Israeli Tax Residence Separately From the Wife - The Sapir Case in the Tel Aviv District Court
Israeli Resident for Tax Purposes: The AK case 

Israeli Resident for Tax Purposes

The Sapir case is all about the "center of life" test that identifies if a person is to be classified as an Israeli resident. An individual is defined by the Income Tax Ordinance to be an Israeli resident if his center of life is in Israel, taking into account, inter alia, the individual’s family, economic and social links. 

Additional factors listed in the Israeli Income Tax Ordinance the indicate residence are the following: location of a permanent home; place of residence of the individual and his family; place where the individual regularly works or employed; location of active economic interests; place where the individual is active in organizations or institutions etc. 

An individual is presumed to be an Israeli resident, unless challenged by the taxpayer or by the Israel Tax Authority, in any of the following circumstances: (1) the individual is present in Israel for at least 183 days in a tax year ending December 31; or (2) the individual is present in Israel for at least 30 days in the current tax year and 425 cumulative days in the current and two earlier tax years. 

See also:
Israeli Residence for tax purposes
Israeli Tax Law on Residency 

The Sapir Case

An Israeli citizen named Sapir moved to Singapore in 1994 with his wife and family. He returned to Israel in 1998, but gone back to Singapore in 2001, without his wife and family. Although Sapir filed Israeli annual income tax reports, he did not include his income in Singapore. The The Kfar Saba Tax Assessor argued that this income should be considered as income of an Israeli resident. 

Tel Aviv District Court Judge Altuvia Magen held that Sapir's center of life was in Singapore in the relevant years, on the basis of factual indicators such as his ownership of an apartment there, permanent residency, payments to a retirement-fund, medical and other insurance in Singapore, holding of a bank account and social ties in Singapore. In addition to the above, Sapir was classified as a Singapore resident and accordingly reported and paid taxes in Singapore. 

The Supreme Court dismissed the petition by the Israel Tax Authority upheld the judgment of the Tel Aviv District Court Judge Altuvia Magen, and clarified that a couple can have different centers of life.

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

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