Can Businesspeople Have Two Centers of Life?

This legal approach requires every investor to re-examine their steps, because it makes the process of severing tax residency far more complex than commonly assumed.

The traditional approach among Israelis is that when a person packs up their belongings, moves the core of their business activity to a foreign country, and spends most of their years there building an economic empire, they thereby sever their Israeli residency. In the case at hand, the taxpayer left Israel as early as 1985 for business purposes and achieved economic and business success in Africa while paying tax in Nigeria. Even so, the Israel Tax Authority and the court refused to accept the argument that he was a foreign resident and decided to tax him on his income. The reason lies in the fact that having a substantial economic interest abroad does not necessarily cancel the personal and family ties that remain in Israel. This approach creates a particularly broad tax net.

When the Israel Tax Authority examines the question of residency, it relies on the “Center of Life Test,” which reviews the totality of a person’s connections, as well as the quantitative day-count presumption set out in the Income Tax Ordinance. In the ruling in question, the court carefully analyzed the taxpayer’s routine. He continued to spend many days in Israel each year, sometimes between 150 and 250 days, thereby consistently meeting the day-count presumption. In practice, the Tax Authority examines where the person sleeps when visiting Israel, whether they hold luxury assets, such as an art collection worth millions of shekels in their home in Tel Aviv, and whether they bear the living expenses of the local family unit. The critical conclusion arising from the ruling is that the tax authorities and the courts tend to give greater weight to family and social ties than to business ties. As a result, even major businesses in Nigeria will not “outweigh” the connection to a family that remained in Israel.

The Tax Challenge and the Doctrine of Parallel Centers of Life

The central challenge arising from the ruling is the court’s willingness to recognize a situation in which a person has two centers of life at the same time. The taxpayer did prove that he had very strong business and economic ties to Nigeria. However, the court held that a taxpayer may certainly have two permanent homes and several centers of life around the world at the same time. The practical significance for businesspeople is substantial: the fact that you have succeeded in building a new, genuine and active center of life in a foreign country does not necessarily guarantee a complete severance from the Israel Tax Authority. As long as you have not severed your ties to Israel in a substantive and consistent manner, the Tax Authority may argue that your Israeli center of life is still alive and well. In cases where there is no double tax treaty between the countries, as in the case of Nigeria, this situation may expose the investor to double taxation on all of their worldwide income.

Civil and Family Risk and the Separation Trap

Many businesspeople argue before the assessing officer that there has been a family separation between them and their spouses who remained in Israel, and that the family connection has therefore been severed. The ruling presents a highly critical and strict approach to such arguments. In this case, the taxpayer claimed that he was separated from his wife and that they maintained a separation of property. However, the court refused to accept this in light of the fact that the two shared a roof in the Tel Aviv apartment during his visits, went on vacations abroad together with friends, and maintained a joint bank account into which millions of shekels were transferred for her living expenses. The attempt to argue that the transfer of funds resulted solely from the taxpayer being a “gentleman” backfired and became decisive evidence of the strength of his connection to his wife and to Israel. This is a clear warning: it is not possible to have it both ways and seek recognition as separated for tax purposes while, in practice, maintaining a shared life.

Evidentiary Challenges and Long-Term Reporting Obligations

The court’s significant reliance on the “day-count presumption” creates a major evidentiary challenge. When a businessperson comes to Israel for cumulative periods exceeding 183 days in a year, the burden of proof shifts, and the taxpayer must prove that their center of life is not in Israel. The case law establishes that this is a strong and meaningful presumption that is very difficult to rebut. Moreover, many citizens who consider themselves foreign residents stop filing annual tax returns in Israel based on a genuine belief that they are exempt from doing so, as the taxpayer did when he failed to report his income for many years. This failure to report means that the tax years do not become time-barred at the regular time, allowing the Israel Tax Authority to open past assessments retroactively and demand millions of shekels, together with penalties, linkage differentials and late-payment interest.

To carry out a proper process of severing residency for tax purposes, it is essential to implement a clear, transparent and consistent strategy that leaves no room for an interpretation of a dual center of life. The first and most critical step is strict management of the number of days spent in Israel, so that the statistical day-count presumption does not arise at all. In addition, the personal center of gravity must be moved to the foreign country. One should avoid holding luxury assets in Israel that are readily available for exclusive residence, cancel local credit cards and memberships in local clubs, and ensure strict corporate governance that disconnects control from Israel. In the case of a claim of separation from the family unit, this must be supported by formal legal agreements, full separation of property in Israel and abroad, and avoidance of maintaining a shared household during visits to Israel.

From our professional experience over the years, we have seen cases in which investors were genuinely convinced that the Israeli tax system was no longer relevant to them simply because of their prolonged absence. In one case, we handled a client, a senior infrastructure engineer who had spent close to eight years in Asia and managed major projects there. He would land in Israel only for short, occasional visits for special medical treatments and to visit his adult daughters. The client was certain that he was a foreign resident in every respect. However, our in-depth review showed that he had not properly severed his economic ties in Israel. Through joint work, we created a precise framework of civil and economic transparency that helped him establish, with supporting documentation, his exclusive center of life in Asia before a significant exit event at the company where he worked. As a result, he avoided exposure to Israeli tax of millions of dollars.

The conclusion from the analysis of the ruling is that the issue of tax residency now requires more conscious and precise planning than ever before. The courts recognize a reality in which a businessperson has a thriving global center of activity yet may still be classified as an Israeli resident as long as they maintain substantial personal and economic ties in Israel. Managing a split life – business abroad alongside family and assets in Israel, without careful tax planning – may expose the taxpayer to complex and unplanned tax payments in Israel. To properly address the challenge of the “dual center of life,” advanced strategic thinking is required, together with the actual implementation of a genuine severance, supported by consistent conduct and appropriate documentation.

Nimrod Yaron & Co. specializes in Israeli and international taxation. Our team consists of professionals with years of experience at the Israel Tax Authority, alongside experience at leading firms and law offices, bringing a combination of legal and economic insight. We advise private and public companies, Israeli and foreign companies, global venture capital funds, as well as clients seeking focused advice in clear and accessible language. We also work with a professional network of accounting firms and law offices around the world, in order to provide a full-service framework in cross-border matters.

We invite you to schedule a strategic consultation with us, in which we will review the full range of your personal and business ties, analyze your exposure in light of the latest case law regarding “parallel centers of life,” and work together to plan a safe and effective course of action for regularizing your status for tax purposes

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