Global Taxation

When an individual or company ceases to be a "resident of Israel" for tax purposes, they are liable to tax in Israel on all the assets they acquired while they were residents of Israel. According to tax laws, they will be deemed to have sold the assets the day before they severed their Israeli residency (however, it is possible to defer the payment of tax until the date of realization (sale) of the asset). The purpose of this tax event is to prevent tax leakage from Israel abroad as a result of the change in the residency of the individual or company.

According to tax laws, an Israeli resident is taxed on all of their taxable activity in Israel and abroad, while a non-resident is taxed only on their taxable activity in Israel. Therefore, it is important to determine whether someone is an Israeli or non-resident. The Income Tax Ordinance and tax treaties signed by Israel attempt to address this dilemma. However, since the distinction between the two is often unclear, it is important to consult with a tax expert and examine each case on a case-by-case basis.

To avoid double taxation, agreements have been negotiated between Israel and many nations that regulate the tax obligations of persons whose income can become entangled in the tax nets of more than one country (usually the agreements are based on the model convention of the United Nations or the OECD).

Furthermore, procedures for preventing double taxation have been enshrined in domestic law that is not contingent in? the presence of international accords. The Income Tax Ordinance establishes the regulations applicable under Israeli law for the prevention of double taxation in the third chapter of Part X. Section 200 (a) of the Ordinance, which deals with giving a credit owing to foreign tax paid overseas, contains the principal provision designed to avoid double taxation payouts pertinent to this procedure. Dividend, as well as Section 4A of the Ordinance, deals with the location of the income Produced or generation.

Individuals or companies who are residents of Israel and have paid foreign taxes on income they earned abroad may claim a credit against their tax liability in Israel. However, this is only possible if the foreign taxes are not voluntary, municipal taxes, or taxes paid due to the individual's foreign citizenship (as opposed to residency for tax purposes). The amount of the credit is limited to the amount of the tax liability in Israel and cannot exceed it.

An individual who became an Israeli tax resident after 2007, whether for the first time or after spending a significant period (at least ten tax consecutive years) outside of Israel as a foreign tax resident, may be entitled to a variety of tax and reporting benefits for the ten-year period beginning from the date the individual became an Israeli tax resident for the first time.