How a US Professor Recovered NIS 73,220 of Israeli Tax on a Sabbatical

Result: NIS 73,220 refunded and Israeli withholding stopped for the remaining eighteen months of a two-year academic appointment · Timeline: 9 months from instruction to refund in the bank · Challenge: Treaty relief claimed after payroll had already run · Authority: Israel Tax Authority assessing officer, Jerusalem · Financial Impact: NIS 73,220 recovered plus NIS 213,120 of further withholding prevented

Background

Our client was a tenured professor of chemical engineering at a public university in the American Midwest, aged 58, who had agreed a two-year visiting research appointment at an Israeli university. The arrangement was settled between the two departments in April 2025. He arrived in October 2025 with his wife and a fourteen-year-old daughter, took a lease in Rehovot, and enrolled the daughter in a local school. His Israeli gross salary was NIS 35,000 a month.

The first payslip arrived at the end of October with NIS 11,840 deducted. He assumed it was a settling-in error and asked the department secretary. The second and third payslips looked the same. By the time somebody in the faculty office suggested he speak to an Israeli tax lawyer it was March 2026, six payroll runs had gone through, and NIS 71,040 had left his account. He was still in Israel, still teaching, and eighteen months of the appointment remained.

The Challenge

The relief he needed was sitting in the treaty the whole time. Article 23 of the US-Israel income tax treaty exempts a resident of one contracting state who visits the other primarily to teach or carry out research at a university, college or other recognised educational institution from host-country tax on that remuneration, for a period not exceeding two years from the date of arrival. He met every limb of it. He had not claimed the student and trainee benefits under Article 24(1) beforehand, which would have destroyed the exemption, and a two-year visit sits comfortably inside the combined five-taxable-year ceiling that Articles 23 and 24 share.

The problem was mechanical rather than legal. Israeli payroll does not consult the treaty. Salary from an Israeli university is Israeli-source employment income under Section 2(2) of the Income Tax Ordinance read with the source rule in Section 4A, the university is an Israeli employer carrying a statutory withholding obligation, and in the absence of an instruction to the contrary it deducts at the Section 121 marginal rates. A non-resident receives none of the credit points that reduce an Israeli employee's deduction, so a monthly gross of NIS 35,000 was taxed from the first shekel and came out at an effective 34%. There is no self-assessment box on an Israeli payslip in which a professor can tick "treaty exempt". The exemption at source exists only in the form of a written certificate issued by the assessing officer to the employer, and until that certificate reaches the payroll department the money keeps going to the Tax Authority every month.

In Practice: Article 23 of the US-Israel income tax treaty exempts a visiting teacher or researcher from Israeli tax on that remuneration for a period not exceeding two years from arrival, with Articles 23 and 24 together capped at five taxable years. Until a certificate from the assessing officer at the Israel Tax Authority reaches the employer, the university withholds at Section 121 rates reaching 47%, plus the Section 121B surtax of 3% on annual income above NIS 721,560. The certificate application runs 4 to 8 weeks, and it must be issued in the employer's own name; a copy addressed to the employee does not stop a payroll run.

What We Did

The file split into two jobs from the first meeting, and they had to run in parallel rather than in sequence. Stopping the bleeding mattered more than recovering the six months already gone, because every further payroll run added to the refund claim and pushed the money further away.

The certificate application went to the assessing officer with jurisdiction over the university as employer, not over the professor as taxpayer. That distinction wastes weeks when it is missed. The application set out the appointment letter, the two-year term with its arrival date, a statement of the duties showing that teaching and research were the primary purpose of the visit, and the salary figures the university would pay. Israeli assessing officers reviewing an Article 23 claim look hard at the word "primarily", so the file was built to answer that question before it was asked. Alongside it went his US certificate of residency on IRS Form 6166, applied for on Form 8802 with the USD 85 individual user fee, which the Internal Revenue Service took five weeks to issue. That form is the single most common cause of delay in these applications, and an American academic who applies for it in the summer before travelling saves himself a quarter of a year.

The certificate issued in June 2026, seven weeks after filing. We delivered it to the university payroll department in its own name together with a covering instruction, and the July payslip came through gross. That single document was worth NIS 213,120 across the eighteen remaining months.

The refund of the tax already deducted ran on a separate track under Section 160 of the Income Tax Ordinance. A refund claim requires an Israeli tax file, so we opened one for him, filed a return for the 2025 tax year and a further claim covering January to March 2026, and attached the certificate, the six payslips, the Form 106 annual reconciliation issued by the university, and the treaty analysis. Israeli refunds are paid only to an Israeli bank account, which is a recurring obstacle for a visiting academic who has closed his account and gone home; he still had his, which removed a step that often adds two months.

There was a complication the university payroll would never have separated for him. During the spring he had given three paid public lectures at a museum in Tel Aviv and taken a consultancy fee from an Israeli chemicals company. Neither sits inside Article 23. The lectures fell under Article 18, which allows Israel to tax a public entertainer or performer where the gross receipts exceed USD 400 for each day of presence, and the consultancy was ordinary Israeli-source income with no relief at all. We carved both out of the exemption claim and reported them. Presenting an Article 23 application that quietly sweeps in non-academic earnings is the fastest way to have the whole claim examined rather than processed.

In Practice: The refund ran under Section 160 of the Income Tax Ordinance, which allows a claim within six years of the end of the relevant tax year and carries consumer price index linkage plus 4% annual interest from the end of the tax year to payment. Here the NIS 71,040 of withheld tax attracted NIS 2,180 of linkage and interest, and the assessing officer paid NIS 73,220 four months after filing, inside the 4 to 9 month range these claims normally run to.

The Outcome

The refund reached his Israeli account in August 2026, nine months after the first over-deducted payslip and five months after he first asked a lawyer about it. Counting the withholding that stopped in July, the appointment was NIS 286,340 better off than the course it had been on.

Two matters were dealt with alongside the refund because a two-year appointment raises them and a single semester does not. The first was residence. Under Section 1 of the Income Tax Ordinance an individual is an Israeli resident where his centre of life is in Israel, with presumptions triggered by 183 days in a tax year or by 30 days in the year together with 425 days across three years. A professor with a lease, a working spouse and a child in an Israeli school meets those tests without intending to. Israeli residence does not defeat Article 23 for the teaching income, because the tie-breaker in Article 3 of the treaty resolves dual residence, but it puts worldwide income and reporting obligations into play. We modelled his US brokerage account and his 403(b) against that exposure before the second tax year opened rather than after it closed.

The second was National Insurance. The treaty is an income tax treaty and reaches no further, and the United States and Israel have never concluded a social security totalization agreement, so the National Insurance Institute can assess Israeli contributions on the same salary with no American offset and no credit toward his US record. That was a real cost, it was not recoverable, and knowing about it in March changed how he negotiated the extension the university offered him in the autumn. The interaction of the treaty as a whole with American reporting is set out in our guide to the US-Israel tax treaty, and the underlying rules on the teachers exemption are covered in our answer on Israeli tax for a visiting US professor.

He declined the third year. Article 23 caps at two, a third year would have been fully taxable in Israel, and it would have invited the assessing officer to look again at whether the visit had ever been primarily academic.

Key Takeaways

What this case illustrates for non-residents in similar situations:

1. Article 23 relief is claimed in advance or recovered the hard way. The exemption exists from the day of arrival, but the only thing that stops an Israeli payroll deducting is a certificate issued by the assessing officer to the employer, and nothing on the payslip tells you that.
2. Apply for IRS Form 6166 before you fly. The Form 8802 application carries an USD 85 user fee for an individual and took five weeks here, and an Israeli certificate application without it sits in the queue rather than being refused.
3. The application goes to the assessing officer for the employer, not for you. Israeli withholding certificates are issued against the deducting employer's file, and sending the application to the wrong office is a straightforward loss of four to six weeks.
4. Money already deducted is not lost. Section 160 allows six years, adds index linkage and 4% annual interest, and paid out in four months here, but it needs an Israeli tax file and an open Israeli bank account, so keep the account until the refund clears.
5. A two-year appointment is a residency event. The 183-day and 30-plus-425-day presumptions in Section 1 are met by any scholar who brings a family, and the treaty saves the salary without saving the rest of the return.

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Facing a Similar Situation?

If an Israeli university, hospital or research institute has offered you an appointment and payroll has already run, the treaty relief is still available and the tax already deducted is still recoverable, but both clocks are running.

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