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Kikar HaShabbatכלכלה

Navigating International Moves: Tax Implications for Israelis Abroad

תומצת מתוך Kikar HaShabbat על ידי baba

דתיטון ענייני

עברית · מערכת חדשות אחת

Moving abroad for work necessitates careful tax planning to manage Israeli residency status and avoid unexpected liabilities. Israeli tax authorities determine residency based on the 'center of life,' not just where income is earned. Individuals should proactively consult tax professionals, document their foreign residency, and understand the implications for assets, pensions, and insurance. Planning ahead, ideally months before departure, is key to a smooth transition and avoiding future complications.

הידיעה ב-5 שורות · תקציר של baba

  • Israeli tax residency is determined by 'center of life,' not solely by where salary is earned.
  • Moving abroad requires formal steps to sever Israeli tax residency to avoid liabilities.
  • Rental income from Israeli properties remains taxable in Israel even after moving abroad.
  • Pension funds and savings accounts are not lost but may have different tax implications.
  • Proactive planning with tax professionals months before departure is crucial for a smooth transition.

Moving abroad for work requires careful planning to avoid significant tax liabilities and ensure a smooth transition, according to legal and financial experts. A common misconception is that earning a salary from overseas automatically makes one a non-resident for tax purposes in Israel. However, Israeli tax authorities focus on the 'center of life,' examining factors such as where a family resides, where their permanent home is, their business and social connections, and the duration of their physical stay in Israel. Israeli tax law considers individuals present in Israel for 183 days or more in a tax year as residents, with additional presumptions based on shorter stays over multiple years.

For those planning an extended stay abroad with their families and without a home remaining in Israel, formally severing residency is crucial. This process can affect assets left behind, as tax authorities might view it as a sale. Experts recommend obtaining a preliminary tax ruling from the Israel Tax Authority before departure to clarify these implications in writing. Documenting the entire period abroad with flight tickets, rental agreements, school records, and pay stubs is vital, as authorities rely on documentation rather than declarations.

Rental income from a property left in Israel is still considered income sourced from Israel, even after moving abroad, and remains subject to reporting requirements. The method of reporting and potential tax deductions depend on the individual's residency status and rental income level. Israelis working abroad who paid taxes in another country may be eligible for tax credits under double taxation treaties. It is advisable to designate a power of attorney or a management company to handle property affairs remotely and to maintain separate bank accounts for rental income to simplify tracking and proof of source.

Beyond taxes, individuals must also consider National Insurance and health insurance. National Insurance rights are tied to insurance periods and status, while health insurance relates to health funds. It is recommended to clarify with the National Insurance Institute whether one remains insured, if paying voluntary contributions is worthwhile for future rights, and what happens to children's coverage. Pension funds and savings accounts are not lost upon moving abroad, though employer contributions cease. Options include leaving funds as they are, continuing personal contributions for continuity, or withdrawing funds, with tax implications varying based on residency status at the time of withdrawal. It is also important to review how the new residency status affects taxes on investment gains.

In the weeks before departure, it is advisable to meet with a tax attorney and accountant, gather all relevant documents, arrange power of attorney for property management, and secure digital access to Israeli financial accounts and tax authorities. Planning for the return to Israel is also important, as special rules apply to returning residents. Proactive planning, starting several months before the move, can prevent unexpected tax surprises and offer more options.

Kikar HaShabbatחרדית · בני ברק

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