Can a non-resident get an advance tax ruling from the Israel Tax Authority?

A ruling is available to you, and for a non-resident facing a one-off Israeli transaction it is often the cheapest certainty on the market. The Institution for Tax Decisions was put on a statutory footing by Amendment 147 to the Income Tax Ordinance with effect from 1 January 2006, and Sections 158B to 158F govern it. A tax ruling is a decision on the tax liability, the tax consequences or the effect on liability of an action the applicant proposes to take, and it is normally sought before the action, though in defined cases the Authority will rule after the event.

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Detailed Answer

The distinction that matters is between a ruling given with an agreement and one given without. A ruling in agreement is finalised between the applicant and the Authority and takes effect as a contract, binding both sides on the facts presented. A ruling given without agreement records the Authority's position where the applicant will not accept its terms, and leaves both parties free to fight it later in the ordinary assessment and appeal route. That difference determines strategy: an applicant who is not going to accept the Authority's conditions is usually better off never asking, because a negative ruling in the file is an unhelpful thing to argue against. Applications may be filed anonymously at the outset, which lets counsel test the reception of a structure, but the file must be identified before a binding ruling issues. Alongside the general track the Authority operates green tracks, a set of prescribed forms and criteria for recurring situations where the ruling is issued on the strength of the applicant's declarations, including Form 913 for status as a first-time Israeli resident or a veteran returning resident, and green tracks for foreign investment funds under Section 16A.

The timetable is the part foreign applicants most often misjudge. No filing fee was ever prescribed, despite the Finance Minister having power to set one, so the cost is entirely professional rather than official. But the State Comptroller found that the recommended service standard of 90 to 120 days from submission of the complete file was never implemented, and that one department reached 400 days. If your closing is in six weeks, a general-track ruling will not arrive in time and the green track is worth examining instead. Three practical points apply to an applicant living abroad. The application, the facts and the supporting documents go in in Hebrew through an Israeli representative, and the quality of the factual presentation determines the outcome more than the legal argument does. Powers of attorney executed abroad need notarisation and an apostille. And a ruling binds only on the facts described, so a structure that shifts after the ruling issues, even slightly, may fall outside it. Where a dispute has already crystallised, the ruling route is closed to you and the answer lies in the assessment process instead, which we cover in our answer on objecting to and appealing an Israeli tax assessment.

In Practice: Advance rulings run under Sections 158B to 158F of the Income Tax Ordinance [New Version] 5721-1961, introduced by Amendment 147 with effect from 1 January 2006, and are issued by the Institution for Tax Decisions at the Israel Tax Authority. There is no statutory filing fee. The Authority issues about 2,000 rulings and approvals a year, the recommended standard of 90 to 120 days was never adopted, and delays of a year or more occur. Israeli professional fees for preparing and running a general-track application typically fall between NIS 20,000 and NIS 60,000, with green track applications materially cheaper.

When to Consult a Lawyer

• You are about to sell an Israeli asset where the exemption depends on a contested characterisation, for example whether a holding is a real estate association. A ruling in agreement removes the risk before the money moves.
• You are relocating to Israel and intend to rely on the ten-year exemption for a new or veteran returning resident. The green track exists precisely for this, and Form 913 is far faster than arguing status at assessment.
• The Authority has already opened an enquiry or issued an assessment on the same facts. At that point a ruling application will usually be refused and can prejudice your position in the objection.

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Speak With an Israeli Attorney

We prepare and run advance ruling applications for non-residents, choose between the general and green tracks, and draft the factual presentation the ruling will be measured against.

Contact us for a confidential initial consultation.