The Israeli Budget for 2015 includes various new reporting obligations and also other changes to the tax rules. In this note I will summarize the new reporting obligations and some of the main changes to the tax rules that were included in the Israeli Budget for 2015.
Presently, most Israeli residents are not required to submit annual tax returns mostly because the tax system is based on a withholding system. The Israeli Budget for 2015 now orders that the following individuals would be required to submit a tax return:
(1) An individual who is presumed to be an Israeli resident, in the case he stays in the country for 183 days or more during the tax year; or in the case he stays in Israel for 30 days or more during the tax year and for a total of 425 days or more during the tax year and the 2 prior tax years;
(2) An Israeli resident individual who transfers abroad an amount of NIS 500,000 or more during the tax year;
(3) An Israeli resident individual who is a beneficiary of a trust and is at least 25 years of age.
Israeli residency: New Israeli Tax circular
Israeli Tax Law on Residency
New immigrants and returning citizens
There are various changes planed to the benefits for new immigrants and senior returning citizens. According to section 14(d) of the Israeli Tax Ordinance the Finance Minister, by the approval of the Parliamentary Finance Committee, has the power to enact legislation that may extend the 10-year benefit period with respect to individuals that perform substantial investments relating to the economy of Israel. According to the Israeli Budget for 2015 the possibility to extend the 10-year benefit would be abolished.
See also: Israeli Taxation of New Immigrants: Proposed Changes
Payments for termination of employment
The Israeli Budget for 2015 suggests a newrule in relation to payments for the termination of employment. Such payments would be automatically regarded as ordinary income subject to progressive tax rates, instead of letting the taxpayer classify such payments as capital gains subject to a reduced tax rate.
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