Green Track Tax Ruling – First-Time Israeli Resident / Returning Veteran Resident

The Israel Tax Authority (ITA) operates green tracks for obtaining tax rulings. These, aim to provide taxpayers and representatives with certainty regarding disputed issues. One of the main tracks deals with determining an individual’s status as a “first-time Israeli resident” or a “veteran returning resident”. Pursuant to Sections 14 and 97 of the Income Tax Ordinance (the ITO).

The green track is designed to assist new immigrants (first-time Israeli residents) and Israelis who returned after a prolonged stay abroad. It enables them to benefit from tax benefits stipulated in the Income Tax Ordinance (ITO) without being drawn into lengthy bureaucratic procedures or future disputes.

The track is intended for new immigrants already in Israel or those planning to immigrate. Both the conditions and the decisions in the form differ between those already in Israel and those planning to arrive.

When is it necessary to submit a request via this track?

The request is relevant when a new immigrant or veteran returning resident seeks to determine the commencement date of residency for tax purposes.

The Legal Significance

Receiving a tax ruling via the green track grants the taxpayer legal and tax certainty. Recognition as a “first-time Israeli resident” or “veteran returning resident” allows them to enjoy tax benefits stipulated in the Ordinance.

For further details on tax benefits, see the link: Tax Benefits for New Immigrants.

It is crucial to ensure accurate declarations. Remember – the request is based on the taxpayer’s declaration. Any discrepancy between the declaration and the actual situation, as examined by the ITA, may result in retroactive cancellation of the ruling.

Main Conditions in the Form

The taxpayer must declare one of two alternatives regarding the ten years preceding immigration:

Alternative A:

1. In each of the ten years preceding the year of arrival in Israel, the declarant did not have a home in Israel available for personal use.
2. In each of the ten years preceding arrival in Israel, the declarant did not stay in Israel for more than 90 days per year. For this section and this confirmation, counting days of stay in Israel will be done such that part of a day counts as a full day.
3. In each of the ten years preceding the declarant’s arrival in Israel in which they had a spouse, their spouse and/or minor children did not stay in Israel for more than 90 days per year.
4. The declarant’s spouse and the declarant did not receive National Insurance benefits (such as child allowances, disability benefits, survivors’ benefits, etc.) in each of the ten years preceding their arrival in Israel.
5. In each of the ten years preceding the declarant’s arrival in Israel, the declarant and/or their spouse and/or any of their children did not receive medical treatment funded by a health fund or hospital in Israel under the National Health Insurance Law.
6. In each of the ten years preceding the declarant’s arrival in Israel, neither the declarant nor their spouse met the conditions set in Regulation 2 of the Income Tax Regulations (Determination of Individuals as Israeli Residents and Non-Residents), 2006.
7. At the time of signing the form, no criminal or assessment proceedings are being conducted against the declarant at the ITA.
8. During the ten years preceding the declarant’s arrival in Israel, the declarant’s residency as an Israeli resident was not determined in a final assessment.

Alternative B:

1. In any eight years out of the ten years preceding the declarant’s arrival in Israel, the declarant did not have a home in Israel available for personal use.
2. In any eight years out of the ten years preceding the declarant’s arrival in Israel, the declarant did not stay in Israel for more than 60 days per year.
3. In the two remaining years (hereinafter: “the remaining two years”), the declarant did not stay in Israel for more than 183 days per year, provided that the remaining two years are not consecutive years.
4. In the year preceding the declarant’s arrival in Israel, the declarant did not stay in Israel for more than 60 days.
5. In each of the ten years preceding the declarant’s arrival in Israel in which the declarant had a spouse, the conditions in Sections 1 and 3 of these alternatives apply to the declarant’s spouse, with a limitation of 90 days of stay in Israel instead of 60 days in Israel as specified in Section 1.
6. The declarant’s spouse and the declarant did not receive National Insurance benefits (such as child allowances, disability benefits, survivors’ benefits, etc.) in each of the ten years preceding their arrival in Israel.
7. In each of the ten years preceding the declarant’s arrival in Israel, the declarant and/or their spouse and/or any of their children did not receive medical treatment funded by a health fund or hospital in Israel under the National Health Insurance Law.
8. In each of the ten years preceding the declarant’s arrival in Israel, neither the declarant nor their spouse met the conditions set in Regulation 2 of the Income Tax Regulations (Determination of Individuals as Israeli Residents and Non-Residents), 2006.
9. At the time of signing the form, no criminal or assessment proceedings are being conducted against the declarant at the ITA.
10. During the ten years preceding the declarant’s arrival in Israel, the declarant’s residency as an Israeli resident was not determined in a final assessment.

The main requirement is to prove that the move to Israel is genuine and significant, not merely a technical maneuver.

 Possible Points of Dispute

• Definition of “Center of Life”
• The term “center of life” is not defined unambiguously. The ITA examines various parameters – place of residence, place of work, children’s place of study, bank accounts, business activity, and other tests established in case law over the years.
• Counting Days of Stay in Israel
• According to the guidelines, even part of a day counts as a full day. This means that a departure day and a return day count as two days of stay in Israel. This situation may lead to certain taxpayers not meeting the conditions of a maximum of 60 days per year before their immigration.
• Holding an Apartment in Israel
• Even if the apartment was rented to others, the ITA may argue that this constitutes a “connection to Israel” and a permanent home in Israel in certain cases, depending on the lease agreement definitions.
• National Insurance Benefits and Health Services
• Receiving a benefit or medical service may be considered a connection to Israel.

Examples of Borderline Cases

• Apartment ownership but no actual use: An individual who owned an apartment in Israel but rented it to others.
• Frequent visits to Israel: A family that visited Israel several times a year but claims their center of life was abroad.
• Work abroad after returning to Israel: A new immigrant who arrived in Israel but continued to work abroad partially.

Key Points in Completing the Form and Submitting the Request

Complete supporting documents must be attached to the tax ruling request:

1. Purchase and lease agreements for an apartment in Israel from the date of arrival in Israel.
2. For an individual who owned an apartment in Israel during the 10 years preceding arrival in Israel, they must attach apartment lease agreements demonstrating that the apartment was not available for their personal use.
3. Immigrant certificate or returning resident certificate from the Ministry of Absorption.
4. Detailed traveler certificate from the Ministry of Interior and Border Police for the individual and spouse, including information on entries to Israel using a foreign passport.
5. Confirmation from National Insurance regarding non-receipt of any benefits during the 10 years preceding arrival in Israel.
6. Details of the number of days of stay in Israel for you and family members in each tax year from the date of arrival in Israel (despite the ITA having easy access to this information).

What to Do Before and After Receiving the Ruling

Before:

• Early tax planning, including in certain cases structuring and transfer pricing work.
• Review of holdings structure and expected income from Israel and abroad.
• Examination of implications with banks and other foreign authorities, according to tax treaties, FATCA and CRS provisions.

After:

• Ongoing reports to the Income Tax Authority according to the new status.
• Update National Insurance and other authorities.
• Monitoring the benefit period and preparing for its end, including tax planning that will preserve the tax benefits accumulated during the period.

To contact Nimrod Yaron & Co. – Israeli and International Taxation – click here.

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