How a British Couple Moved GBP 700,000 of Apartment Proceeds Out of Israel After Two Bank Refusals

Result: Roughly NIS 3.3M (about GBP 700,000) released to the couple's UK account after two refusals · Timeline: 6 weeks from the first rejected wire to funds cleared · Challenge: Bank blocked the transfer on AML and withholding grounds · Authority: Israel Tax Authority, the remitting bank under Bank of Israel Directive 411 · Financial Impact: Avoided an unjustified 25% withholding of roughly NIS 825,000

Background

A retired couple in Manchester had owned a two-bedroom apartment near the Tel Aviv port since 2012. They had bought it for holidays and family visits, used it for a decade, and decided in 2026 that the stairs and the distance had become too much. They sold it for NIS 3.6M to an Israeli buyer, paid the agent and the lawyer, settled the betterment tax, and assumed the hard part was over.

It was not. When they instructed their Israeli bank to wire the net proceeds to their account in England, the transfer bounced back. The branch asked for documents they did not have to hand, in Hebrew, with a deadline. A second attempt a few weeks later was refused again, this time for a different reason. By the time they called us they were convinced the bank was holding their own money hostage, which is roughly what it felt like.

The truth was less sinister and more procedural. Two separate gates sit in front of a large outbound transfer from an Israeli account held by a non-resident, and the couple had walked into both of them at once.

The Challenge

The first gate is tax. Under Section 170 of the Income Tax Ordinance 1961, an Israeli bank must withhold tax at source, 25 percent for an individual, when it remits Israeli-source funds abroad to a foreign resident, unless the customer presents a clearance from the Israel Tax Authority confirming an exemption or a reduced rate. The bank is not exercising judgment here. It is following a statutory obligation, and without the certificate it will either refuse the wire or withhold a quarter of it and send the rest.

The second gate is anti-money-laundering compliance. Under the Anti-Money Laundering Law 2000 and the Bank of Israel's Proper Conduct of Banking Business Directive 411, the bank must verify the source of funds before executing a large cross-border transfer, especially for a non-resident account. A sum in the millions of shekels, leaving the country, to an overseas account, is exactly the profile that triggers enhanced due diligence. The branch wanted a documented, traceable story for where the money came from, and "we sold our flat" without the paper trail behind it does not satisfy a compliance officer.

The couple had tripped the AML gate on the first attempt and the tax gate on the second. Neither refusal was wrong. Both were fixable.

In Practice: Under Section 170 of the Income Tax Ordinance 1961, a bank must withhold 25 percent from a payment transferred abroad to a foreign resident unless an Israel Tax Authority certificate authorises an exemption or reduced rate. For a foreign resident the application is Form A/114, the claim for reduced rate or exemption, filed with the assessing officer; the ITA typically issues the certificate within 3 to 6 weeks. On a transfer of roughly NIS 3.3M, an unjustified 25 percent withholding would have trapped about NIS 825,000 in the hands of the tax authority pending a later refund.

What We Did

We treated the two gates as one project, because the documents overlap.

For the AML file, we built the source-of-funds chain end to end. That meant the original 2012 purchase agreement (heskem mecher), the 2026 sale agreement, the Land Registry extract (nesach tabu) showing the couple as the registered owners, the buyer's payment records, and the lawyer's trust-account statements showing the proceeds arriving and being consolidated. Laid out in order, the file answered the only question the compliance officer actually had: this money is the clean proceeds of a property these people owned and sold.

For the tax gate, we prepared and filed Form A/114 with the assessing officer, supported by the betterment-tax (mas shevach) assessment showing the capital-gains position on the sale had already been dealt with and the tax paid. Because the tax on the gain was settled, there was no basis for a further 25 percent withholding on the remittance, and the application asked the ITA to say so in a certificate the bank could rely on.

We also did something the couple could not have known to do. We spoke to the bank's compliance desk directly, in Hebrew, and agreed in advance exactly which documents would satisfy them, so the third attempt would not fail on a missing page. Running a non-resident transfer of this size is as much about sequencing as about paperwork. The certificate has to exist before the wire goes in, and the AML file has to be accepted before the certificate matters.

In Practice: Under the Anti-Money Laundering Law 2000 and Bank of Israel Directive 411, a bank must verify the source of funds before a large cross-border transfer, and for a non-resident it will usually demand the purchase agreement, the sale agreement, the nesach tabu, and the tax assessment. Assembling and certifying that file and clearing the bank's review took about five weeks in this case. The betterment tax already paid on the sale was roughly NIS 210,000, and it was the proof of that payment, more than anything else, that turned the compliance officer from an obstacle into an ally.

The Outcome

With the ITA certificate in hand and the source-of-funds file accepted, the bank executed the transfer on the third attempt. Roughly NIS 3.3M, about GBP 700,000 at the rate that week, reached the couple's UK account in a single wire, with no withholding deducted. Six weeks had passed from the first bounced transfer to cleared funds.

The number that mattered most was the one that did not happen. Had they given up and accepted a withheld transfer, the bank would have deducted around NIS 825,000 and sent it to the tax authority, leaving them to chase a refund for money that was never taxable to begin with. People do accept that outcome, out of exhaustion, more often than you would think.

We closed the loop on the UK side as well. As UK residents, the couple were taxable on the worldwide gain, so the sale had to be reported to HMRC on their Self Assessment return. We coordinated with their UK accountant so the Israeli betterment tax could be claimed as foreign tax credit relief under the UK-Israel double taxation convention, which prevents the same gain being taxed twice. The detail of moving money across the border, and the documents banks expect, is set out in our guide on international transfers from Israel for non-residents.

Key Takeaways

What this case illustrates for non-residents moving money out of Israel:

1. A bank refusal is usually about two gates, not malice. Section 170 withholding clearance and Directive 411 source-of-funds verification are separate hurdles, and a large transfer can hit both at once.
2. Get the tax certificate before you instruct the wire. Without an ITA exemption on Form A/114, the bank either refuses the transfer or withholds 25 percent, and recovering it afterward is slow.
3. Build the source-of-funds chain in full. The purchase agreement, the sale agreement, the Land Registry extract, and the tax assessment together tell a story a compliance officer can accept.
4. Proof that the tax on the underlying gain is paid is the single most persuasive document. It satisfies both gates at the same time.
5. Plan the home-country side in parallel. A UK resident must report the gain to HMRC and can credit the Israeli tax, but only if the paperwork is kept and coordinated.

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Facing a Similar Situation?

If an Israeli bank has refused to send your property proceeds, inheritance, or investment funds abroad, the block is almost always a missing tax certificate or an incomplete source-of-funds file, both of which can be resolved. We handle the ITA clearance and the bank compliance review so the money moves cleanly.

Contact us for a confidential consultation about your Israeli legal matter.