The repatriant/newcomer/returning resident tax regulation
In 2008, celebrating 60 years of independence, the Israeli government amended the tax code (nicknamed the Milchan law – after the former Israeli producer Arnon Milchan who wished to come back to Israel) which benefitted former Israelis or Jews that are immigrating to Israel from abroad. The amendment offered considerable tax easements in order to encourage Immigration of Jews from other countries as well as to assist former Israelis to return to Israel.
The amendment includes a series of exemptions from paying taxes on income and earnings generated outside of Israel and also exemption from reporting them.
This means that a new or returning resident will not be required to pay taxes on their earnings from their overseas assets, and they will be exempted from filing an annual report as well as a capital statement to the tax authority for 10 years after their settling in Israel. Towards the end of this period, those who have benefited from this amendment are advised to do a new calculation and planning of the tax strategy for the period following the end of the exemption. It may be the case that returning or new immigrants may be required to make capital statements or tax statements as well as to report about their bank accounts, foreign companies’ ownership, real estate assets and other assets that are subject to tax rules in Israel.
Tax consulting for new immigrants
The transition of new immigrants to a taxpayer’s status at the end of the exemption period, when they combine assets and income both in Israel and abroad, requires consultation with a tax expert CPA who is familiar with taxation legislation and regulations applicable for new immigrants. Neglecting consultation may lead to double taxation, increased payment due to inability to recognize losses or credit a due to paid taxes abroad, and considerable spending. Whether it is bank accounts, real estate, securities or any income that you have in both Israel and abroad, you need to work closely in advance, with a certified tax expert, in order to be properly represented, gain maximal credits and reduce your tax liability.
Your exemption period is about to end. What needs to be done?
New immigrants who enjoy the Tax Amendment No. 168 and who still have a few more years until the end of the exemption, are advised to examine their tax related status and the state of their assets ahead of time. We highly recommend preparing for the exemption and consult with a taxing expert accountant about your expected tax liability and start the process and preparations that may take a longer period of time in advance.
Some of the new or returning residents may have already received tax payments requirements and tax filing requirements from the Tax Authority. We urge you to make sure that you handle it, with the assistance of a certified tax accountant.
Although many immigrants are familiar with handling their taxes, abroad, we advise to get professional assistance, when dealing with the Israeli tax authorities. Israeli taxation system has its own unique characteristics and is dynamically changes over time. Negotiating with the local authorities regarding tax liabilities requires skill and experience, usually best provided by experts in the field.