International Taxation | נמרוד ירון ושות׳

New Tax Benefit for New Immigrants: Tax Exemption for Two Years

Adam Zur — Tue, 25 Nov 2025 12:16:06 +0000

The 2026 tax benefit for new immigrants offers an unprecedented 0% tax exemption on income from Israel. Here’s everything you need to know about the new reform.

On November 6, 2025, Finance Minister Bezalel Smotrich and Minister of Aliyah and Integration Ofir Sofer presented a reform in the taxation of new immigrants. An official bill has not yet been published, but the reform is expected to be approved as part of the state budget for 2026. The purpose of this initiative is to encourage immigration to Israel through significant tax benefits for new immigrants and returning residents.

The reform is expected to grant full and partial tax exemptions in the first years of residence in Israel. The goal is to strengthen the economy, ease the integration of new immigrants, and attract high-quality human capital to Israel.

Background to the Initiative

The launch of the new program at this time is driven by several underlying factors. In the past two years, there has been a significant increase in antisemitic incidents worldwide, especially following the “Am-Kelavi” war. This has caused many Jews to consider making Aliyah to Israel.

Additionally, Western countries such as the UK have recently made changes to their tax policies, making Israel more attractive for Jews with capital.

Furthermore, there is a need to strengthen the Israeli economy and attract high quality human capital (professionals, entrepreneurs, high-tech workers, etc.) who will contribute to economic growth and development of the economy.

What is the New Benefit and Who is Eligible?

Under the new program, tax benefits are expected to be granted to new immigrants and returning residents who immigrate to Israel during 2026. They will enjoy an unprecedented tax benefit on employment income as employees or self-employed individuals, generated in Israel.

Tax Rates Under the New Benefit:

Year	Tax Rate	Notes
2026	0%	Full exemption
2027	0%	Full exemption
2028	Up to 10%	Reduced exemption
2029	Up to 20%	Reduced exemption
2030	Up to 30%	Reduced exemption

*Applies to income up to 1 million ₪ per year (as of 2025).

The Difference Between a New Immigrant and a Returning Resident

New immigrant – someone who immigrated to Israel for the first time under the Law of Return, 1950, and is a resident of Israel for the first time after immigration.” According to the definition, a new immigrant is someone who was not a resident of Israel before.

Returning resident – an individual who was a resident of Israel, ceased to be a resident of Israel, and returned to become a resident of Israel.” In other words, a returning resident is someone who was a resident of Israel in the past, left Israel for an extended period, and then decided to return.

There is a distinction between a regular returning resident and a veteran returning resident regarding existing tax benefits. A regular returning resident is someone who stayed outside Israel for 5 to 10 years. A veteran returning resident is someone who stayed outside Israel for more than 10 years. Tax benefits for a veteran returning resident are more significant than those for a regular returning resident and are similar to those of a new immigrant.

Income Ceiling

The benefit will apply to incomes of up to 1 million ₪ per year. Income above this threshold will be taxed according to the credit points for new immigrants and veteran returning residents.

For Example:

A new immigrant earns 400,000₪ per year as an employee in Israel. Under the new benefits, they will not pay any tax in the first two years (2026-2027). This represents savings of tens of thousands of shekels compared to the current situation.

Additional Benefits Beyond Tax Exemption on Israeli Income

It is important to emphasize that the new benefit is added to existing benefits that new immigrants and returning residents are currently entitled to and does not replace them.

Benefits That will Continue to Exist (as of 2025)

Tax exemption on income from outside Israel for 10 years from the date of becoming an Israeli resident (subject to the type of income and resident status).
Increased tax credit points for new immigrants.
Purchase tax exemption on a first apartment (subject to conditions).
Tax exemption on assets and property brought from outside Israel.

A new immigrant can enjoy both exemptions simultaneously. The firs, exemption on foreign income for 10 years. The second, gradual exemption on Israeli income, up to 5 years. This is a dual tax advantage that constitutes a very strong economic incentive.

For additional information on the full range of benefits available to new immigrants (as of 2023) click here.

Criticism of the Program – Important Points to Know

Some critics argue that the benefit primarily favors wealthy immigrants and those with high incomes, and less to other populations or veteran citizens. However, from a professional and legal perspective, the benefit represents a significant economic opportunity that should be properly examined and utilized subject to each potential immigrant’s personal situation.

Important Tax Aspects

New immigrants must accurately report assets, bank accounts, and investments abroad. Failure to report may lead to heavy penalties. Additionally, it is important to understand the tax implications of changing residency, both in Israel and in the country of origin. In some cases, double taxation or complex reporting obligations may occur. There is a possibility to combine the new benefit with additional benefits such as subsidized loans.

Preparing for Immigration: Practical Steps

Verify that you meet the definition of “New Immigrant” or “Returning Resident” according to the Law of Return and Income Tax Ordinance. It is recommended to consult a professional entity.
Consult an international taxation expert to understand the full implications and plan the transition optimally.
Ensure you properly close tax obligations in the country from which you are immigrating and understand the double taxation prevention agreements.
Open a file with the Ministry of Aliyah and Integration.
Plan ahead for issues such as opening a bank account in Israel, purchasing an apartment, transferring funds, establishing a business, etc.

The new tax reform for immigrants and returning residents represents a significant and unprecedented economic opportunity. Full tax exemption for two years, combined with existing benefits, creates a very strong economic incentive for those considering immigration to Israel.

Nimrod Yaron & Co. specializes in Israeli and international taxation. The firm accompanies new immigrants and returning residents at all stages of the process, from early tax planning, through arranging residency status, to ongoing support in taxation matters, property acquisition, and establishing businesses in Israel. To contact a representative from our firm, click here.

FAQ

When exactly will the new program take effect?

How Does the Israeli Tax Authority Obtain Information About Foreign Bank Accounts?

Adam Zur — Sun, 28 Sep 2025 07:14:22 +0000

The Israeli Tax Authority has developed a range of tools and methods to detect and identify bank accounts held by Israeli residents abroad. In recent years, the Authority has significantly strengthened both its technological and legal capabilities, enabling it to uncover undeclared accounts with a level of efficiency that was not possible in the past.

If you maintain foreign bank accounts that have not yet been reported, it is important to understand how the Tax Authority obtains such information. In these circumstances, it may be wise to consider applying for the Voluntary Disclosure Program, which allows you to regularize your situation before enforcement measures are taken.

The New Voluntary Disclosure Procedure, published in August 2025, enables taxpayers who failed to report income in previous years to settle their reporting obligations until August 31, 2026. Under this procedure, a taxpayer who submits a good‑faith application, provides full disclosure of all relevant information, and pays the required tax (including interest and indexation from the end of each tax year until payment), may be granted immunity from criminal proceedings with respect to the offenses disclosed in the application.

The process is carried out exclusively online, through a designated form on the Tax Authority’s website, and may be completed either by filing amended returns or through an assessment procedure. It is important to emphasize that this benefit applies only to those who apply voluntarily, before the Tax Authority initiates an audit, investigation, or obtains information regarding their case.

International Agreements – The Basis for Information Exchange

Israel is a signatory to tax treaties with more than 50 countries worldwide. Within these treaties, many countries have also agreed to automatic information exchange regarding the income and financial assets of Israeli residents within their jurisdictions.

Another important mechanism that assists the Tax Authority in identifying undeclared bank accounts is FATCA (Foreign Account Tax Compliance Act), a U.S. law designed to ensure taxation of foreign accounts. Under FATCA, all non‑U.S. financial institutions are required to identify accounts held by U.S. citizens and report them to the U.S. tax authorities. In 2014, Israel signed a FATCA agreement with the United States, which also enables the Israeli Tax Authority to receive information about Israeli residents holding financial accounts in the U.S.

Following FATCA, European countries that are members of the OECD developed the CRS (Common Reporting Standard), a global framework for the automatic exchange of financial account information. CRS applies both to OECD member states and to other participating countries and was designed to strengthen international cooperation in tax enforcement.

Today, the Israeli Tax Authority identifies numerous undeclared bank accounts worldwide belonging to Israeli residents.

For further reading, see the article “The End of Banking Secrecy – How the Tax Authority Knows About Your Money Abroad.”

What Has Recently Changed?

If the Tax Authority has had access to such information for years, what has now transformed this data into active enforcement measures?

Until recently, although the Tax Authority had access to large volumes of information about Israeli citizens with foreign accounts, it faced difficulties in directly identifying account holders. Challenges included discrepancies such as foreign passport numbers, variations in the spelling of names across countries, and other data mismatches.

To address these challenges, the Authority has invested heavily in advanced technological tools that allow it to cross‑reference foreign data and accurately identify undeclared account holders. It has recruited programmers, BI specialists, big data experts, and other professionals, enabling it to transform raw data into actionable insights for enforcement purposes.

If you are an Israeli resident with one or more undeclared foreign bank accounts, it is always preferable to approach the Tax Authority voluntarily before it reaches out to you.

What Should You Do If You Have an Undeclared Account?

If you hold a foreign bank account that you have not reported, we strongly recommend contacting the Tax Authority voluntarily before it initiates action against you.

As of August 2025, the Tax Authority has published a new temporary order allowing voluntary disclosure applications until August 31, 2026.

This procedure allows taxpayers who have not yet reported assets or income to regularize their situation, pay the required tax, and obtain immunity from criminal proceedings. Immunity is conditional upon full and honest disclosure, payment of all taxes due, and cooperation with the Tax Authority. This is a unique opportunity to start fresh with the authorities, before information about your assets and income inevitably reaches them through international information exchange agreements.

It is important to note that these benefits are available only to those who apply voluntarily, before the Tax Authority initiates an investigation, or who already possess incriminating information. Applications may be submitted online until August 31, 2026, provided that the applicant meets all conditions, including full disclosure, payment of all taxes due, and cooperation with the Authority.

For more information about the Voluntary Disclosure procedure – click here.

Nimrod Yaron & Co. has extensive experience assisting clients with voluntary disclosure processes, regularizing foreign assets, and lawful international tax planning. For professional advice to help you navigate the new era of global financial transparency – contact us.

Q&A

What should I do if I have an undeclared foreign bank account?

The End of Banking Secrecy – How Does the Israeli Tax Authority Know About Your Money Abroad?

Adam Zur — Wed, 27 Aug 2025 14:45:03 +0000

Even if you don’t have a secret Swiss bank account, the global financial transparency revolution affects every Israeli who owns assets, works, or invests outside of Israel. In today’s global and digital era, it is relatively easy to hold assets, establish companies, and manage bank accounts overseas. As a result, countries have increased their cooperation in exchanging information, driven by a shared interest in preventing tax evasion and the abuse of tax treaties.

Today, more than ever, it is difficult – if not impossible – to hide money or assets from the watchful eyes of the Tax Authority. Information exchange mechanisms (CRS, FATCA, and international tax treaties) have turned banks into “gatekeepers,” obligated to report to their local tax authorities on financial accounts held by foreign residents. These authorities then transfer the information to the taxpayer’s country of residence, enabling each country to easily access updated information on its residents’ assets and income worldwide.

In this context, it is important to note that in August 2025, the Israeli Tax Authority published a temporary order allowing taxpayers to submit voluntary disclosure requests until August 31, 2026. This procedure enables individuals who have not yet reported assets or income to settle their affairs, pay the required taxes, and receive immunity from criminal proceedings. Immunity is conditional upon full and honest disclosure, payment of all taxes due, and full cooperation with the Tax Authority. This “window of opportunity” is designed to allow taxpayers to “start fresh” before information on their assets and income inevitably reaches the authorities through global information exchange.

How Did It All Begin?

In 2004, the Swiss investment giant UBS was accused of concealing information about the accounts of American clients. The U.S. Senate claimed that UBS had helped clients evade taxes amounting to approximately $20 billion.

The U.S. government demanded that UBS disclose the details of all American clients’ accounts, but UBS initially refused, citing banking secrecy obligations. After lengthy negotiations and threats of sanctions, the parties reached a settlement, and the U.S. government realized it needed binding legislation to address the issue.

The UBS case led to the enactment of FATCA and a dramatic shift in the global financial landscape.

FATCA – The American Revolution in Financial Transparency

FATCA (Foreign Account Tax Compliance Act) is a U.S. law that came into effect in 2010, requiring foreign financial institutions to report to the IRS on accounts held by U.S. citizens or residents.

Under FATCA, financial institutions must automatically report accounts held (directly or indirectly) by Americans. Institutions that fail to comply face severe sanctions, including a 30% withholding tax on all U.S.-sourced payments.

Israel signed a FATCA agreement with the U.S., under which Israeli financial institutions transfer information to the Israeli Tax Authority, which then forwards it to the IRS. At the same time, Israel receives information on accounts held by Israelis in U.S. financial institutions.

Thus, banks worldwide effectively became “information agents” for the IRS.

CRS – The Global Standard for Information Exchange

Following FATCA, the OECD developed the CRS (Common Reporting Standard), a global framework for automatic information exchange between countries. Under CRS, financial institutions collect information on foreign residents and transfer it to their local tax authority, which then forwards it to the taxpayer’s country of residence.

In May 2014, Israel announced its adoption of CRS alongside about 50 other countries. In July 2016, the Knesset approved Amendment 227 to the Income Tax Ordinance, requiring financial institutions to obtain information from account holders to determine their identity and country of tax residence.

Today, more than 100 countries and territories have joined CRS, including jurisdictions once considered “tax havens.” Each year, in March, the Israeli Tax Authority receives detailed financial data from all countries with which Israel has an agreement, enabling it to track Israelis’ assets and income worldwide.

What About Countries Without Agreements with Israel?

If you thought that Cyprus, for example, could still serve as a safe haven from the Israeli Tax Authority, think again.

Israel has tax treaties with specific countries, and only with those countries does it officially exchange information for tax enforcement purposes. However, even in cases where no treaty exists (such as Cyprus), the Tax Authority can still obtain information.

First, through leaks or document seizures, as in the case of the “Panama Papers.” This massive 2016 leak from a Panamanian law firm exposed how politicians, businesspeople, celebrities, and wealthy corporations worldwide used shell companies in tax havens to conceal assets, evade taxes, and sometimes launder money. Following the leak, tax authorities worldwide, including Israel, launched investigations that led to arrests and criminal proceedings.

Second, new treaties are constantly being signed. For example, a tax treaty between Cyprus and Israel is currently being finalized (our firm is involved in the process as a director at the Israel-Cyprus Chamber of Commerce). Once signed, the Israeli Tax Authority will receive retroactive information on Israelis holding assets in Cyprus who have evaded taxes.

Conclusion – The End of Banking Secrecy

In today’s world, banking secrecy is no longer protected as it once was, and financial information is more exposed than ever to tax authorities.

The message is clear: in the era of global financial transparency, it is virtually impossible to conceal income or assets from tax authorities. Attempts to do so are not only doomed to fail but may also result in heavy sanctions, fines, and even criminal proceedings.

What can and should be done is proper, legal tax planning that optimizes tax liability while complying with the law. If taxes have already been evaded, the solution is to settle matters with the Tax Authority through the voluntary disclosure procedure. Under the new temporary order (valid until August 31, 2026), taxpayers can regularize their reporting, pay the required taxes, and receive immunity from criminal prosecution for the offenses disclosed. The process is conducted online, requires full disclosure, and may be handled either through amended returns or a settlement agreement. This is a one-time opportunity to resolve matters with the authorities before the information inevitably reaches them through global information exchange.

For more details on voluntary disclosure – click here.

Nimrod Yaron & Co. has extensive experience assisting clients with voluntary disclosure procedures, asset regularization abroad, and lawful international tax planning. For professional advice to help you navigate the era of global financial transparency – contact us.

Q&A

Can one legally avoid reporting foreign income?

Purchasing Real Estate Abroad

Adam Zur — Thu, 09 Jan 2025 11:42:07 +0000

Tax Implications of Buying Apartments and Properties Abroad

Real estate transactions, particularly purchasing properties abroad, are often seen as highly attractive investment opportunities for Israelis, especially due to the current security and political situation in the country. This has heightened the motivation for Israelis to buy apartments and invest in real estate outside of Israel, exploring new and diverse options.

Such real estate investments can include direct investments in real estate – such as buying a private apartment, a private house, or commercial properties. Alternatively, there are indirect investments, such as, real estate investment trusts (REITs), shares in real estate companies, and more.

However, it is important to consider the tax implications in Israel as well as the target country, and all other relevant factors in order to ensure the investment is as informed and profitable as possible.

Ways to Hold Property Abroad

Deciding how to hold the property should be done according to the country and type of property being purchased. This decision could involve holding the property through direct ownership in the buyer’s name or ownership through a company. If through a company, which type of company should be established? The choice of how to the hold the property is very important as there are various goals which buyers may wish to achieve, for example:

Protecting property owners from lawsuits (in some countries, such lawsuits can result in astronomical sums.) This protection is typically achieved by holding property through a company that is considered a separate legal entity.
Protection against inheritance tax- it is important to verify whether the target country imposes inheritance tax. Inheritance tax can be relatively high, increasing the cost of transferring property through inheritance within the country. There are various ways to mitigate inheritance tax, each way with its advantages and disadvantages.
Reporting costs over the years.
Utilization of profits in an Israeli company owned by the investors.
What is the purpose of the investment? Is it passive rental income or active resale following the purchase, renovation, and improvement of the property?
Is the primary goal of purchasing the property capital gains or preserving the value of the purchase in line with the local currency index?

Based on responses to the previous questions, one of the available options in the target country will be selected, and a professional should be consultedto determine the best approach for registering the property in the purchase transaction.

To read more about the process of establishing a company abroad, click here.

Key Points to Clarify before Purchasing Abroad

Currency conversion prior to transferring funds to the target country- The costs of transferring and converting money into foreign currency can be high, therefore, it is important to work with reliable non-banking companies approved by the Ministry of Finance to minimize conversion fees.
Approval from the Tax Authority for the transfer- If the target country has a tax treaty to prevent double taxation, there is no need for an approval from the Tax Authority to preform the transfer. However, if the target country does not have a tax treaty with Israel, it is necessary to coordinate with the Tax Authority.
Opening a bank account abroad- it is important to check what is required in the bureaucratic process to open a bank account in the target country before making the investment. In some cases, it is possible to open an online bank account instead of a physical one. Our firm collaborates with entities in both Israel and abroad to facilitate swift and efficient openings of foreign bank accounts.
Tax rates- It is important to examine the applicable tax rates in the both target country and Israel regarding the whole process of purchasing real estate.
Reporting to the Israeli Tax Authority- Israeli law requires the submission of an annual tax report to the Tax Authority for transfers abroad exceeding 500 000 NIS and for purchased property exceeding the value of approximately 2.1 million NIS.

Buying Real Estate Abroad- How to Maximize your Profits

If you are considering purchasing a property abroad and want to maximize your profits to ensure a worthwhile investment, it is recommended to consult with an international tax expert before making the purchase. Our firm specializes in international taxation and consultation services to help you get started. As part of this process, we hold an initial meeting with clients to understand their needs.

Then, following this meeting, you will receive a detailed document explaining the relevant options, advantages and disadvantages of each option, with recommendations on how to proceed. You will then be referred to the appropriate professional(s) who will accompany you throughout the entire process.

If you’re interested in maximizing your profits through investments in real estate abroad, you can contact us and schedule an introductory call.

Additional articles on International Taxation:

Global Intangible

Investments in Latvia – Riga

Changes in the Greek Golden Visa Program 2025

The MLI Convention

Property Sale Abroad (Outside of Israel)

Update to Form 150 for the 2023 and 2024 Fiscal Years – Declaration of Holding a Foreign Resident Entity

Taxation of REITs

Adam Zur — Thu, 26 Dec 2024 14:46:28 +0000

What is a Real Estate Investment Trust/Fund (REIT)?

A REIT (Real Estate Investment Trust) is an entity designed to provide investors with the opportunity to profit from income-generating real estate investments. The acronym REIT stands for ‘Real Estate Investment Trust’ or, as referred to in the Income Tax Ordinance, ‘Real Estate Investment Fund.’ In other words, an investment fund focused on real estate.

The legislation permitting the establishment of REIT’s was enacted in 2005 (Amendment 147), introducing the REIT investment vehicle to the Income Tax Ordinance.

According to Income Tax Circular No. 2018/4, the purpose of the REIT instrument is to enable both experienced and inexperienced investors to invest in a trust dedicated entirely to income-generating real estate assets. The trust is obligated to regularly distribute all its profits to shareholders, ensuring a steady flow of returns for investors.

The financial instrument allows for the public to indirectly participate in large-scale income-generating real estate projects and enjoy the benefits of the investment. Real estate assets eligible for investments may include, industrial buildings, offices, residential buildings, commercial centers, shopping centers, and more. Additionally, investments can be diversified in terms of the amount invested, and the composition of the investment portfolios (changing risk distribution).

REITs are subject to a single-tier taxation model aligned with the principle that shareholders should be treated as though they directly invested in the income-generating real estate asset. The profits generated and distributed by the trust are taxed solely at shareholder level, and not according to the standard corporate model of double taxation- which is taxed at both corporate and shareholder levels.

Subsequently, amendment 222 to the Income Tax Ordinance, was enacted to amend and clarify the chapters provisions that govern the taxation of REITs. This has allowed for the simplification of its application and encourages establishment of additional real estate trusts.

Advantages to the Country

Low taxation on REITs could encourage the establishment of more trusts in Israel, resulting in more institutionalized and organized investment opportunities. With the right incentives for private investors, it is possible to transform the Israeli real estate market to have a preference for investing in REITs, rather than directly in real estate. Such transformation can be more efficient, economic-wise for both experienced and inexperienced investors and diminish initial intimidation for potential investors.

Types of REIT’s

There are two types of REIT’s:

Type one- REITs traded on the stock exchange.

In the framework of this type of REIT, an individual can invest in real estate projects, worth various amounts (not necessarily large ones). This trust allows the investor to manage risks in a way that suits them, as the investment is divided into a variety of projects.

Type two- REITs specializing in real estate financial funding.

This type of REIT purchases real estate through loans and mortgages from various entities. The purchased real estate serves as a collateral for the repayment of the loan.

General Overview of the Conditions a Company Must Meet to be Considered a REIT:

The trust must be established as a new company created specifically for the purpose of a real estate trust, with no prior rights or obligations. This ensures that, after public offering, the public holding shares in the trust will not bear any past liabilities.
The value of its income-generating assets must not fall below 200 million NIS.
The trust must be listed for trading on the Tel Aviv Stock Exchange (TSE) in Israel. Additionally, the trust may be listed on a stock exchange abroad.
At least 95% of the assets are income-generating real estate properties.
The trust’s leverage ratio must not exceed 60% of the value of the income-generating real estate, and 20% of the value of the other assets.
Development activity in the trust can not exceed 5% of the total asset value.
At least 75% of the company’s assets must be located in Israel, based on the total value of all income-generating real estate.
No more than five investors directly or indirectly, may hold 50% or more of the equity or voting rights in the trust.
The trust will distribute profits as dividends amounting to at least 90% of the taxable income.

Taxation of REITs

As mentioned earlier, the investor in the REIT is treated as directly holding the funds assets (instead of the two-tier taxation model). Therefore, for tax purpose; capital gains tax, tax rates and loss offsets, taxable income, including, real estate capital gains of the trust distributed to shareholders under the conditions of section 64a9 of the Income Tax Ordinance, will be treated as if it were taxable income or real estate capital gains of the shareholders.

The idea behind this policy is “transparency”, defined in the section as ‘the taxable income of the shareholders.’ This transparency essentially replaces the two-tier tax model.

In contrast to this, losses accumulated by the trust won’t be distributed to the shareholders, rather will be carried forward to future years and will be offset solely at the trust level, in accordance to the offset provisions outlined in 64a4(h) of the Tax Income Ordinance.

The tax liability for the trust’s income occurs at the time of receiving the profits or other distributions from the trust. The tax liability for the sale of the trust’s shares will occur at the time of selling the shares.

There is a variety of tax aspects and benefits as a result of amendment 222 to the Income Tax Ordinance. For example, profits gained from the sale of real estate (capital gains tax) differs from the tax imposed on rental income. Through tax planning and professional services, like those provided in our firm, it is possible to reduce tax’s and optimize REIT investments according to the applicable conditions.

Advantages of REITs

Risk management through amounts and investment distribution.
REITs are required to report on assets and expected dividends.
High profit potential in income-generating real estate.
No extensive experience or knowledge required to invest in REITs.

Disadvantages of REITs

Dependence on the trusts management company, not every company will yield profits.
Dependence on the capital market, REITs involve stock investments which can be volatile.
Limited investment scope, due to not being able to invest in non-income generating real estate assets.

Currently, there is a small number of REITs available in Israel, however, due to the state’s incentives, there may be a significant growth in the coming years. When done with the proper management and professional consultation, investing in REITs can be profitable, convenient, and safer than other market investments.

Update for Form 150 for 2024

Adam Zur — Thu, 19 Dec 2024 13:29:47 +0000

In May 2024, the Israeli Tax Authority published an updated version of Form 150 (Declaration of Owning Foreign Entity Shares Abroad, Directly or Indirectly) for the 2023-2024 tax year. Due to feedback and comments the tax authority received regarding the form, it announced on December 11^,2024, the release of an updated Form 150 for the 2024 tax year. For a copy of the updated form, click here. (Please note an English version of the updated form has yet to be published).

According to the Israel Tax Authority’s announcement, for reports submitted for the 2024 tax year, there is an option to choose which version of the form to use-the form published in May 2024, or the form published in December 2024. For reports submitted starting January 1, 2025, the updated form will solely be accepted.

In the same announcement, the tax authority updated on its efforts to develop an API (application programming interface) that will enable electronic submission of the form on Sha’am (the Israel Tax Authority’s IT system). It is important to note that until electronic submission is available, the form must be submitted manually.

In an article we posted August 2024, we reviewed the differences between the Form 150 published in May 2024 to the old version, to read the article, click here.

In this article, we will review the differences between the new version of Form 150 and the version published in May 2024.

Changes in the New Form 150 for the 2024 Tax Year

The two significant changes between the new Form 150 and the one publish in May 2024 is:

Reorganization of the form making it easier to fill.
Addition of extra explanations at the end of the form regarding definitions of terms mentioned in the form.

In addition to these two changes, a few new questions have been added to the form, and others have been removed.

Changes in the Forms Structure

The old version of the form included only two tables; a table with details about rights in a foreign entity and a table on ownership details. Whereas the updated form contains five tables. The ownership details table remains unchanged, and is the second table in the form, whereas the main table from the old form has been split into four separate tables. Each table focuses on a different topic, as follows:

The first table contains general information about the foreign entity, for example; its name, country of residence, the number of corporations in which the foreign entity holds ownership, and more.
The third table provides additional information on the foreign entity, such as, its classification for tax purposes in Israel, the existence of Israeli-resident officers or board members, the existence of exempt passive income, and more.
The fourth table focuses on questions related to Controlled Foreign Corporations (CFC).
The fifth and final table focuses on questions regarding Foreign Professional Corporations (FPC).

This restructuring allows for a simpler process in completing the form.

Additional Questions Added to the Form:

Questions added and their explanations/interpretations:

Declaration of the type of entity of the foreign entity- When submitting the form, it is required to specify whether the foreign entity is a company, partnership, or other. Our interpretation is that the tax authority is aiming to understand how to address the case:
- Should issues of control and management be examined when it comes to a company?
- Are there any withdrawals by the owner(s) that can be classified as debit balance?
- Should the income of the foreign entity be reflected and reported in the shareowners file?
Classification of the foreign entity for tax purposes in Israel- There are several options for completing these sections: a regular company, a family company, a home company, a trust asset holding company, application of section 5.2.2 of Circular 5/2004, or a partnership. It seems that the tax authority wants to understand the taxation method for the foreign entity. Whether it is an opaque entity or transparent one.

Explanations of Terms Mentioned in the Form

In the previous article, we explained new terms introduced in the May 2024 version of the form. Not many terms have been added to the new version beyond what was included in the previous forms. However, some of the existing questions have been clarified:

Instead of using the vague term “corporate group” the term ” chain of companies” will be used. The term is clearly defined in section 67b of the Income Tax Ordinance. Chain of companies refers to at least two entities holding shares in one another, directly or indirectly.
Transparent entity- An entity whose taxable income is taxed at the shareholder’s level. For example, partnership, home company, family companies, foreign LLC that are transparent in the U.S. and Israel, etc.
Exempt income or income not in the tax base- Exempt income refers to income that would normally be taxable if not for a specific granted law. For example, residential rental income up to the exemption threshold. Income that is not in the tax base refers to income that is not required to be reported or taxed on under the provisions of the law. For example, income earned by a foreign resident from sources outside of Israel.
Family company- As defined in section 64a of the Income Tax Ordinance, it is a company whose shareholders are all relatives, as defined in section 88 of the Income Tax Ordinance. Meaning, this type of company is considered a transparent entity in Israel.
Home company- As defined in section 64 of the Income Tax Ordinance, this refers to a closely held company that meets the conditions stated in the section, including that all assets are real estate assets. Meaning, this type of company is considered a transparent entity in Israel.
Trust asset holding company- As defined in section 75c of the Income Tax Ordinance, this is a company established solely for the purpose of holding trust assets, where the trustee holds all the shares (directly or indirectly).
Application of section 5.2.2 of circular 2004/5- An American LLC that is controlled and managed from outside of Israel and has chosen to be treated as a transparent entity in both the U.S. and Israel. This type of company is considered to be a transparent company in Israel for foreign tax credit purposes (e.g. losses cannot be considered transparent.)

These changes make the form simpler to complete compared to its previous version and structure. However, a proper and precise filling of the form still requires extensive knowledge and expertise in accounting practices regarding foreign entities and the tax laws of that country. This is due to the form serving as an indicator to the tax authority for certain issues and incorrect completion can lead to unnecessary tax assessments and additional problems with the Israeli Tax Authority.

Our firm specializes in Israeli and international taxes, providing guidance to lawyers and accountants on all relevant international tax matters for them or their clients. To contact a representative from our firm. Click here.

Additional articles on International Taxation:

Global Intangible

Investments in Latvia – Riga

Changes in the Greek Golden Visa Program 2025

The MLI Convention

Property Sale Abroad (Outside of Israel)

Update to Form 150 for the 2023 and 2024 Fiscal Years – Declaration of Holding a Foreign Resident Entity

Application of Minimum Corporate Tax in Israel

Adam Zur — Wed, 04 Dec 2024 18:05:09 +0000

The local minimum tax regime (QDMTT) is a mechanism introduced by the OECD to combat base erosion and profit shifting (BEPS Program) by multinational corporations. The mechanism imposes a minimum tax rate of 15% on multinational groups meeting specific criteria.

Starting with the 2024 tax year, including EU members, have implemented this mechanism. The Israeli Ministry of finance announced in July 2024 that this tax regime also be implemented, taking effect starting the 2026 tax year.

Overview of the BEPS Program

In recent years, the OECD has been working through the BEPS program to prevent erosion tax and base shifting my multinational groups, which cause significant tax losses for many countries. The goal of the BEPS program is to identify and address key factors that lead to tax base erosion in countries that are members of the OECD.

The BEPS program includes 15 actions, each addressing a different aspect of multinational taxation activities. For example, digital economy taxation, controlled foreign corporations, permanent establishments, transfer pricing, etc.

Minimum corporate tax is part of Action One, which deals with taxing the digital economy. Action One includes two main pillars. The first pillar focuses on profits between different jurisdictions in which the multinational group operates. The second pillar oversees the taxation of multinational groups with annual revenue exceeding €750 million. The local minimum corporate tax mechanism is part of pillar 2.

What is Pillar Two?

The purpose of pillar two is to ensure that the multinational group pays effective tax that is not less than 15%, regardless of the jurisdiction they are in. This aims to stop the “race to the bottom” among countries in setting corporate tax rates.

Pillar 2 is composed of two main layers:

Adjusting Domestic law– Adapting domestic legislation ensures that companies within multinational groups with annual revenues exceeding €750 million are subject to a minimum effective tax rate of 15% or higher. If a company’s tax rate within the group is lower, the residence country of the company will have the primary right to collect the difference to reach 15%.
Additional Tax Collection– An additional tax will be imposed on the parent company or another company within the group based on the income of a group company paying an effective tax rate below 15%. This ensures that low tax payments by one company in the group have a ‘tax top-up’ by another company in the group.

According to the OECD rules, each country can choose the scope and method of adopting pillar two into its domestic law.

Minimum Corporate Tax in Israel

The state of Israel announced its participation in the pillars program as well as the planned structure for taxing the digital economy in 2021. At the end of July 2024, Finance Minister Bezalel Smotrich announced starting from the 2026 tax year, the minimum corporate tax regime in Israel will apply to residential Israeli companies that are part of multinational groups with annual revenue exceeding €750 million.

At this stage, it is recommended to delay the implementation of the second layer of pillar 2, and to revisit the issue after a period of implementing the local minimum corporate tax mechanism.

The corporate tax rate in Israel is already above 15%, therefore most companies will not be affected by this change. This update will mainly affect companies which benefit from the favorable tax regimes in Israel. For example, large technology companies that, under Capital Investment Law, are taxed at lower rates.

Implementing a minimum corporate tax in Isreal may cause these companies to reduce or even completely remove their activities in Israel and work in domestic jurisdictions with lower tax rates that have not yet adopted this mechanism. The Ministry of Finance faces a challenging task of balancing implementing the mechanism with maintaining Israel’s fiscal attractiveness.

Our firm specializes in Israeli and international taxation, providing our clients with comprehensive support in the field of international taxation. To contact a representative from our firm, click here.

Aliyah and Brazilian Non-Resident’s Taxation – CPF and Annual Income Report

Adam Zur — Mon, 25 Nov 2024 14:59:32 +0000

Making Aliyah and becoming a non-resident affect certain tax obligations in Brazil. As a result, individuals question their tax data and reports after the status change.

This article covers key aspects of CPF and Annual Income Reports for New Immigrants in Israel. It aims to clarify the process and helps avoid potential complications in managing tax responsibilities.

Brazilian Individual Taxpayer Registration (CPF – Cadastro de Pessoas Físicas)

The CPF is a database code managed by the Federal Revenue of Brazil (RFB). According to Law No. 14,534/2023, CPF is a unique identification number in Brazilian public services.

Brazilians living in Israel must keep their CPF active and regularized. Individuals residing in Israel are required to register to CPF if, for example:

They own real estate and/or conduct business dealings in real estate in Brazil;
They have bank, savings or investment accounts in Brazil;
They operate in the financial or capital markets in Brazil, including stock, commodity, futures and similar exchanges; or
They have assets and rights in Brazil subject to public registration or specific registration, including real estate, vehicles, vessels, aircraft, financial instruments and equity interests or in the capital market.

Thus, CPF is essential for several operations, such as financial transactions, real estate transactions, consular services and managing assets in Brazil.

Brazilians in Israel can request the CPF’s registration or regularization via RFB’s email. Keeping the CPF under regulation is essential to avoid impediments in transactions and services related to Brazil.

Annual Income Report in Brazil

Non-residents do not have to file an Annual Income Report in Brazil (DIRPF), even if they have goods or conduct commercial activities in Brazil. As previously mentioned, they are only required to keep their CPF active and regularized.

Income and capital gains received in Brazil by Brazilians residing in Israel are subject to taxation. Although, there are some applicable exemptions and reductions. The tax is withheld in Brazil and considered definitive. No additional tax obligations will be required.

In some cases, the Non-Resident’s legal representative should collect the tax income through the “Carnê-leão” program. “Carnê-leão” is used to pay all the monthly income tax. Additionally, the tax rate will depend on the nature and amount of income received.

In other cases, income tax is paid through the Capital Gain Program (GCAP). The remitter domiciled in Brazil must withhold the tax, and if they are also living abroad their legal representative should withhold the tax. Sometimes there are exemptions/reductions, and the rate depends on the capital gain value.

Tax payments in Brazil are done through a specific document (DARF– Documento de Arrecadação de Receitas Federais) under specific codes. Individuals who are Non-Residents cannot file a DIRPF. Thus, the remitter, whether an individual or a company (capital gain), or the legal representative (“Carnê-leão”), must include this information in their report, informing the CPF of the incoming remittance.

Brazilians leaving Brazil should complete and update their Exit Formalities, if applicable. Failure to do so may cause issues with the tax authority in the future. Non-residents often have outdated information linked to their CPF after leaving Brazil.

Our firm assists New Immigrants with tax matters arising due to relocation, which include tax planning, understanding their rights and obligations in Israel and Brazil, and more. Our firm comprises highly qualified professionals, including former officers of the Israel Tax Authority, certified public accountants (CPAs), tax consultants, economists, and lawyers.

Click here to contact a team member.

Frequently Asked Questions

Is it necessary to keep the CPF active even if you live in Israel?

Yes, the CPF must stay active and regularized for any financial or real estate operation in Brazil. Also, if are kept any assets and rights in Brazil.

Do non-resident Brazilians need to submit the Annual Income Report in Brazil (DIRPF)?

No, non-resident Brazilians are exempt from submitting the DIRPF, but they must keep their CPF up to date.

How is income from Brazil taxed for Brazilians living in Israel?

It is taxed at source in Brazil and is definitive, without the need for extra declaration by this individual.

What happens if a Brazilian does not carry out their tax exit procedure?

The individual may have problems with the tax authority, related to the tax collection by the paying source.