Does a US professor pay Israeli income tax on a visiting appointment at an Israeli university?

Sabbatical arrangements are usually agreed between departments long before anyone speaks to a tax adviser. By the time the question is asked the visiting scholar has an Israeli contract, an apartment in Rehovot and a start date in October, and the first Israeli payslip has already had close to half of it removed. The treaty relief that would have prevented that exists, and it is one of the few provisions in the US-Israel convention that is genuinely generous, but it is claimed in advance or not at all.

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Detailed Answer

Article 23 of the US-Israel income tax treaty deals with teachers. An individual who is a resident of one contracting state and visits the other primarily for the purpose of teaching or engaging in research at a university, college or other recognised educational institution is exempt from tax in the host state on the remuneration he receives for that teaching or research, for a period not exceeding two years from the date of arrival. Two limitations travel with it. The benefit is not available to someone who, in the period immediately preceding, claimed the student and trainee benefits under Article 24(1); and the benefits under Articles 23 and 24 taken together may extend only for such time as is reasonably required to effectuate the purpose of the visit, and in no case beyond five taxable years from arrival. The exemption is reciprocal, which is why the same article is quoted to Israeli academics visiting Boston, and it is capped at two years rather than renewable, so an appointment extended into a third year produces Israeli tax on the third year's salary and invites the assessing officer to look again at whether the visit was ever primarily for teaching or research. Note also what Article 23 does not cover: consultancy for an Israeli company alongside the appointment, paid public lectures outside the university, and royalties are all outside it, and a paid performance or public appearance falls instead under Article 18, which allows Israel to tax where the gross income exceeds USD 400 for each day of presence.

The Israeli side of the arrangement runs on its own rails and does not defer politely to the treaty. Salary from an Israeli university is Israeli-source employment income under Section 2(2) of the Income Tax Ordinance and the source rule in Section 4A, the university is an Israeli employer with a withholding obligation, and it will deduct at the Section 121 marginal rates, reaching 47%, with the Section 121B surtax of 3% on annual income above NIS 721,560 for the better-paid appointments. To stop that at source, apply to the assessing officer before the first payroll run for a certificate confirming the Article 23 exemption, produce your US certificate of residency on IRS Form 6166, and give the university the certificate in its own name; allow four to eight weeks. If the tax has already gone, the recovery route is a refund claim under Section 160 of the Ordinance, open for six years with consumer price index linkage and 4% annual interest, and running four to nine months in practice. There is a second issue that a two-year appointment raises and a one-semester visit does not. Under Section 1 of the Ordinance you become an Israeli resident if your centre of life is in Israel, with presumptions triggered at 183 days in a tax year or 30 days in the year plus 425 across three years, and a two-year stay with a family and a lease will meet them. Residence under domestic law does not defeat Article 23 for the teaching income, because the treaty tie-breaker in Article 3 resolves dual residence, but it does put your worldwide income, your US investment accounts and your reporting obligations in play, and it should be planned rather than discovered. The mechanics of the treaty as a whole are covered in our guide to the US-Israel tax treaty.

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 and the benefit lost where Article 24(1) student relief was claimed immediately before. The Israeli university withholds at Section 121 rates up to 47%, plus the Section 121B surtax of 3% above NIS 721,560, unless a certificate from the assessing officer at the Israel Tax Authority is produced first, which takes 4 to 8 weeks; afterwards the route is a Section 160 refund claim, six years to file and 4 to 9 months to pay.

When to Consult a Lawyer

• The appointment might be extended beyond two years. The decision to extend is a tax decision as much as an academic one, and it is far cheaper to model the third year before the offer is accepted than to argue about the first two afterwards.
• You are bringing a spouse who will also work, or children who will enrol locally. Family presence weighs heavily in the centre-of-life test, and it is the factor that most often converts a visiting scholar into an Israeli tax resident without anyone intending it.
• Part of your Israeli income is consultancy, a grant or paid speaking. Those sit outside Article 23, sometimes under Article 18 with its USD 400 daily threshold, and the university's payroll will not separate them for you.

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Speak With an Israeli Attorney

We secure the Article 23 exemption certificate before an Israeli university runs its first payroll, and advise on the residency exposure a two-year appointment creates.

Contact us for a confidential initial consultation.