Israeli Tax Law Q&A

Not without a real risk of losing that argument, at least for now. Section 87 of the Income Tax Ordinance is designed to keep pension savings locked until retirement age, and an early withdrawal carries a 35% Israeli tax charge deducted by the fund. Returning Britons point to the UK-Israel convention, under which pensions paid to a UK resident are taxable only in the UK, but in an interim decision in Civil Appeal 1740-12-24 the District Court signalled that this will not be easy to prove. The final judgment is still awaited.

It can tax him, and your shares are part of the reason why. Section 75B of the Income Tax Ordinance treats a private foreign company as a controlled foreign company where most of its income is passive, the foreign tax rate on that income does not exceed 15%, and Israeli residents hold more than 50% of the means of control. A separate limb catches holdings of over 40% by Israeli residents where, together with a foreign-resident relative, they exceed 50%. Your brother is then deemed to receive a dividend of his share of the undistributed passive profits.

Very possibly, yes. Amendment No. 272 to the Income Tax Ordinance, published on 7 April 2024, requires a trustee to notify the Israel Tax Authority of the creation of a trust within 90 days, and to report changes in its ultimate beneficial owners. For a trust that already existed on 7 April 2024, the notice was due within 120 days of 1 January 2026, which put the deadline at the end of April 2026. The duty is a reporting duty and it applies whether or not any Israeli tax is payable.

Yes. Amendment No. 272 to the Income Tax Ordinance, published on 7 April 2024, deleted Section 134B, which is the provision that used to relieve new immigrants and veteran returning residents of any duty to report. The deletion bites on anyone who became an Israeli resident on or after 1 January 2026. The ten-year exemption from Israeli tax under Section 14 survives untouched; what you lost is the privacy, not the exemption.

Not on the property itself. The Israel UAE treaty was signed on 31 May 2021 and entered into force on 29 December 2021, applying from 1 January 2022, and it does cover Israeli tax on gains under the Real Estate Taxation Law 5723-1963. But income and gains from immovable property stay taxable where the property sits, so Israel keeps the rental tax and the 25% betterment tax. The treaty matters for dividends, interest and royalties.

Sometimes, and the reason is that Section 64A of the Income Tax Ordinance taxes the company's income in the hands of one shareholder, the representative taxpayer, at that person's own rates and with that person's own exemptions. Where the representative taxpayer is a non-resident, income Israel does not tax in a non-resident's hands can escape the corporate layer entirely. The election is time-barred: it must reach the assessing officer no later than one month before the tax year begins, or within three months of incorporation.

Through Section 102 of the Income Tax Ordinance, and the trustee is the reason it still works. On the capital gains track the tax is deferred until sale and charged at 25%, provided the grant was made to an Israel Tax Authority approved trustee and the trustee held the securities for at least 24 months from the end of the tax year of deposit. Leaving Israel does not by itself break the track, but Israel keeps taxing the portion of the gain earned while you worked there.

Yes, and the tax is usually taken before you are paid. Services performed physically in Israel are Israeli-source income under Section 4A of the Income Tax Ordinance, and Regulation 2(a) of the Income Tax Regulations (Deduction from Certain Types of Wage) 5727-1967 requires the payer to withhold from artists' and lecturers' fees at the maximum rate under Section 121, currently 47%, while Regulation 2(b) sets 30% for sportspersons. Section 170 imposes a separate 25% withholding on payments to a non-resident individual. A treaty may cut the liability, but only a certificate from the assessing officer cuts the withholding.

Often not, for up to two years. Article 23 of the US-Israel income tax treaty exempts a resident of one country who visits the other primarily to teach or carry out research at an accredited institution from tax in the host country on that remuneration, for a period not exceeding two years from arrival. The exemption is unavailable if you claimed the student benefits in Article 24(1) immediately beforehand, and Articles 23 and 24 together cannot run beyond five taxable years. The Israeli university will still withhold at Section 121 rates, up to 47%, unless you produce a certificate from the assessing officer first.

Yes. Sections 158B to 158F of the Income Tax Ordinance, added by Amendment 147 with effect from 1 January 2006, created the Institution for Tax Decisions, and nothing in them limits applications to Israeli residents. There is no statutory filing fee, applications can be made anonymously at first, and the Authority issues roughly 2,000 rulings a year. The realistic wait is months, not weeks.

You can ask them to, through the mutual agreement procedure written into the Israel-UK double tax convention. Israel Tax Authority Circular 1/2023 of 12 February 2023 sets out how the Israeli side handles these requests, and the file is run by the MAP unit inside the ITA's international taxation department rather than by the assessing officer who taxed you. Most Israeli treaties give you three years from the first notification of the taxing action to present the case, and the competent authorities are expected to work to the OECD's 24-month benchmark. What they are obliged to do is try to reach agreement, not to guarantee one.

It can. Israel is not one of the seven listed countries for Australian controlled foreign company purposes, so an Israeli company you control sits in the unlisted category under Part X of the ITAA 1936, where attribution is at its widest. If the company fails the active income test, meaning 5% or more of its gross turnover is tainted income such as interest, dividends, royalties or rent, your share of its adjusted tainted income is included in your Australian assessable income for that year whether or not anything is distributed. The Israeli company still pays Israeli corporate tax at 23% first, and you claim a foreign income tax offset against the attributed amount.