Benefits for returning residents to Israel
Israel offers significant tax and other benefits to Israeli “expatriates” returning to reside in Israel and to new immigrants (“olim”)
Who is entitled to the benefits?
First Time Israeli Residents (olim): People who have elected to move to Israel and make Israel the center of their life.
Long Absent Returning Residents: Former residents of Israel who return to Israel after a period of at least 10 years (5 years if returned in 2007-2009).
Benefited Returning Residents: Former Israeli residents who return to Israel after a period of 6 years (3 years if left Israel before 2009).
Important tax benefits relating to their status:
Full exemption from tax and reporting on foreign-sourced income (passive and earned income) for a period of 10 years.
Exemption from tax on interest income from certain bank deposits in Israeli banks (foreign currency) for a period of up to 20 years (5 years for returning residents).
Income tax holiday
A number of situations are granted an income tax exemption for a period of 10 years:
Management and Control: one may continue to operate a business overseas with tax exemptions even if the business is managed from Israel
Controlled Foreign Corporation (“CFC”)
Foreign Occupation Company (“FOC”)
Interest income exemption
First Time Israeli Residents (olim) are entitled to exemption on interest income from foreign currency deposits in Israeli banks for a 20-year period, subject to certain conditions.
Returning Residents are entitled to exemption on interest income from foreign currency deposits in Israeli banks for a 5-year period, subject to certain conditions.
Note: This type of income is not a business income and is not recorded in the books of the individual’s business.
The above is a digest of a detailed regime that applies to olim and returning residents. Detailed information is available at Israeli embassies and consulates as well as at Jewish Agency for Israel offices.
Other important condiderations:
Relocation of a family to Israel affects many aspects of life. Tax benefits are important but related considerations are also of great importance. They include:
Estate planning of family affairs, especially if properties or business are left behind after moving to Israel.
Cross-border will under the laws of more then one jurisdiction.
Determinination that existing family trusts comply with the laws of Israel.
Review of prenuptial agreement made at the time of marriage in the country of residence prior to emigration.
Continuing education of young members of the family considering issues of language and recognition of former studies.
Purchasing a new home in Israel.
Establishing a business in Israel.
Finding a suitable job with an Israeli employer and concluding an employment agreement under Israeli labor law.
Professional advice should be sought on all these matters in order to ensure a good move from the current country of residence to Israel and successful integration into Israeli society.
This information is part of a presentation delivered at a wealth conference in Moscow on 24 March 2015 by Alon Kaplan, Advocate and Notary, and Guy Katz, Advocate and Accountant, and a partner of law firm Herzog Fox Neeman.
This entry was posted in Tax on April 15, 2015.