International Taxation
Solutions for Residents with Ties Abroad
In a global era, many people hold assets, income, or economic ties outside Israel. Proper management of international taxation is essential for preventing double taxation, complying with legal requirements, and utilizing the unique tax benefits Israel offers to new immigrants and returning residents. Misunderstanding your residency status can be costly — we help navigate this complexity professionally and accurately.
International Taxation – The Complexity Many Underestimate
Israel requires its residents to pay tax on their worldwide income — not just income from Israel. At the same time, many countries impose tax on income generated within their territory, even if the taxpayer is not a resident. Without proper planning and coordination between the two tax systems, a situation of double taxation may arise — paying twice on the same income.
Tax Treaties
Israel has signed tax treaties with a number of countries that define who taxes what first — and prevent double taxation.
Double Taxation
Without proper planning and application of tax treaties, the same income may be taxed both in Israel and in the foreign country.
Personal Taxation Principle
Israel taxes residents on all their worldwide income, regardless of where the income is generated.
Important to Know – Tax Treaties
Israel has signed treaties for the prevention of double taxation with many countries, including the USA, Germany, the United Kingdom, France, Canada, Australia, and many more. Each treaty sets different rules — who taxes, at what rate, and which income. Proper utilization of the relevant treaty can save significant sums.
What Does the Service Include?
-
Application of international tax treaties
-
International tax planning
-
Regularization of residency and severance of residency
-
Reporting of income from abroad
Who Is the Service Relevant For?
International taxation touches a wide range of people. If you identify with one of the following profiles — international taxation may be relevant for you:
-
New immigrants to Israel are entitled to a tax exemption on income from outside Israel for a period of 10 years. This exemption is worth tens and even hundreds of thousands of shekels — but must be properly managed.
-
Veteran returning residents — Israelis who returned after 10 or more years abroad — are entitled to extensive tax benefits similar to those of new immigrants, including an exemption on income from outside Israel for a defined period.
-
Regular returning residents — Israelis who returned after at least 6 years abroad — are entitled to more limited but still significant benefits. It is important to identify and realize them in time.
-
Israelis with assets abroad: Real estate, bank accounts, investment portfolios, foreign companies — all are subject to reporting to the Israeli Tax Authority, and tax liabilities may arise in two countries simultaneously.
-
Relocation — moving abroad: Israelis who move to work abroad need to correctly define their residency status. Improper severance of residency can lead to continued tax liability in Israel even during years when they are not living here.
-
Freelancers with foreign clients: Income from employers and clients outside Israel.
-
International capital market investors: Capital gains from foreign securities, dividends from companies abroad, interest from international bank accounts — all require reporting and tax calculation in Israel.
-
Owners of foreign companies: An Israeli who holds a company abroad may be exposed to CFC (Controlled Foreign Company) rules, which require Israeli reporting and taxation on the profits of the foreign company.
Severance of Residency
Severance of residency for tax purposes in Israel is a complex process that does not simply amount to physically leaving the country. The Tax Authority examines a range of criteria — center of life, days of stay, family and economic ties — and may determine that you are still an Israeli resident for tax purposes even years after leaving. Improper severance can lead to significant tax liabilities and heavy fines.
Frequently Asked Questions – International Taxation in Israel
Am I required to report income from abroad in Israel?
Yes — an Israeli tax resident is required to report all worldwide income, including salary from work abroad, rental income from foreign properties, dividends, and capital gains. New immigrants and veteran returning residents are entitled to a reporting exemption during the initial period — but this must be properly managed.
What is double taxation and how is it avoided?
Double taxation is a situation where the same income is taxed both in Israel and in the foreign country where it was generated. It is avoided by applying the relevant tax treaty — an agreement between Israel and the foreign country that determines which of them taxes which component. In addition, a tax credit can be received in Israel for tax paid abroad.
What is the difference between a new immigrant, a veteran returning resident, and a regular returning resident?
A new immigrant is someone who moved to Israel and was not previously an Israeli resident. A veteran returning resident is an Israeli who spent at least 10 consecutive years outside Israel. A "regular" returning resident is someone who spent at least 6 years abroad. Each category has different benefits — the most generous being for new immigrants and veteran returning residents.
What is considered "severance of residency" for tax purposes?
Severance of residency for tax purposes occurs when the center of life moves from Israel abroad. The Tax Authority examines criteria such as: number of days spent in Israel, place of family residence, place of work, and location of assets. Physical departure alone is not sufficient — documentation and planning are required.
I have a bank account abroad — does it need to be reported?
Yes. An Israeli tax resident is required to report bank accounts abroad, as well as interest income and profits from those accounts. Failure to report may be considered a tax offense. Israel receives information from many countries about the accounts of its residents.
I moved abroad for work — am I still liable for tax in Israel?
It depends. If you have not severed Israeli residency for tax purposes — you are still required to report and pay tax in Israel on all your income. If you have severed residency, an "exit tax" on certain assets must be examined. Advice before the move is critical.
Who Is the Service Relevant For?
-
New immigrants to Israel
-
Veteran returning residents
-
Regular returning residents
-
Israelis with assets abroad
-
Relocation — moving abroad
-
Freelancers with foreign clients
-
International capital market investors
-
Owners of foreign companies
-
Employees in multinational companies.