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

Adam Zur — Tue, 23 Dec 2025 13:22:13 +0000

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:

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.
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.
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.
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.
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.
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.
At the time of signing the form, no criminal or assessment proceedings are being conducted against the declarant at the ITA.
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:

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.
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.
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.
In the year preceding the declarant’s arrival in Israel, the declarant did not stay in Israel for more than 60 days.
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.
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.
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.
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.
At the time of signing the form, no criminal or assessment proceedings are being conducted against the declarant at the ITA.
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:

Purchase and lease agreements for an apartment in Israel from the date of arrival in Israel.
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.
Immigrant certificate or returning resident certificate from the Ministry of Absorption.
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.
Confirmation from National Insurance regarding non-receipt of any benefits during the 10 years preceding arrival in Israel.
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.

FAQ

Am I eligible for the green track?

Intergenerational Transfer of Assets – Gift or Inheritance? How to Decide Correctly

Adam Zur — Mon, 15 Dec 2025 12:25:53 +0000

Transferring assets during one’s lifetime through a gift is not always the right choice.
The decision to transfer family wealth (real estate, funds, businesses, and rights) from one generation to the next is among the most significant in any family.
It has far-reaching implications for the family’s financial future.

Most asset owners are unaware that this is a complex process. It involves legal, taxation, banking, and family aspects. Every decision – whether a gift, inheritance, or establishing a trust – may substantially affect tax liability and family relationships. Advance planning of asset transfers is crucial to minimize tax exposure and prevent legal complications.

This article reviews the key considerations before deciding to transfer assets as a gift.
It examines when it may be appropriate to consider deferring the transfer until the time of inheritance. It also presents legal tools for executing transfers and alternative methods for assets transfer.

Intergenerational Transfer via Gifting (Without Consideration)

In recent years, the trend of transferring assets during one’s lifetime has been growing.
This stems from a desire to ensure the transfer is executed according to the owner’s wishes and to prevent future conflicts. Gifting an asset enables the donor to see the next generation benefit from it immediately. For example, parents may transfer a residence to their children to help them build their future.

However, it is important to ask: Is it always preferable to make a gift rather than bequeath assets?

The choice between a gift and inheritance depends on the owner’s personal, family, and financial circumstances. A gift allows full control over the process. The transfer occurs immediately, and the assistance is provided in real time. Additionally, a gift provides greater legal certainty. It is less exposed to modifications or contestation, unlike a will, which can be changed or challenged after death.

Alongside these advantages, it is important to remember that once the asset is transferred, control passes to the recipient of the gift. If the donor wishes to continue residing in the property or deriving income from it, this must be secured in a detailed and clear gift agreement. A written, well-drafted, and properly registered gift agreement is essential to prevent future disputes.

The Taxation Aspect – Key Considerations

The method of asset transfer directly affects tax liability.

For example, regarding real estate, a gift given to a “relative” is exempt from capital gains tax. This is under the Land Taxation Law (Appreciation, Sale and Purchase), 1963.
For this matter, ”relative” includes a spouse, parent, grandparent, child, grandchild, great-grandchild, and their spouses. It also includes a sibling when the property was received by inheritance or gift from a parent or grandparent. If the gift is given to someone not considered a ”relative”, no exemption applies and the transfer is taxed as a regular sale.

Regarding purchase tax, certain relief provisions have been established. A gift to a relative is taxed at only one-third of the standard purchase tax. In this context, ”relative” includes a spouse (including one married to the donor for at least six months before the gift), a parent, child and their spouse, grandchild and their spouse and a sibling.

In contrast, inheriting an asset does not involve any tax payment, regardless of the relationship. However, when the heir sells the asset, applicable tax provisions will apply according to the circumstances.

Advantages Comparison

Advantages	Transfer via Gift	Transfer via Inheritance
Taxation	Exempt from capital gains tax when transferred to a relative. Subject to a reduced purchase tax (one-third of the standard rate). Future sales may incur capital gains tax.	No tax on receiving the inheritance. A future sale may be exempt from capital gains tax if the decedent was entitled to this exemption.
Asset Control	The asset leaves the owner’s control immediately upon transfer, unless conditions or use rights are established.	The asset owner retains full control until death.
Family Conflicts	Prevents future disputes through advance planning of asset distribution.	May reduce conflicts during one’s lifetime but requires a clear and precise will.
Financial Consideration	Enables immediate assistance to the next generation. Allows the owner to see beneficiaries enjoy the asset during the owner’s lifetime.	Allows the asset owner to continue generating income from the asset until death.

There is no one-size-fits-all answer. Every family and every asset require individualized assessment. It is advisable to consult with experts in estate planning and taxation. This will help develop a tailored plan that ensures proper transfer of family wealth.

Intergenerational transfer is not limited to the choice between a gift and inheritance alone. It is a broad and complex process. Every decision may substantially affect the final outcome.

Today, various legal and financial tools are available for intergenerational transfers. These include trusts, family agreements, enduring powers of attorney, wealth management mechanisms, marital agreements, family mediation, and international tax solutions. A judicious combination of these tools can ensure retention of control, reduce tax exposure, and enable orderly transfer of family wealth to future generations.

Additionally, the type of assets and their geographic location may substantially affect taxation and applicable laws. Foreign assets are often subject to different estate, inheritance, or gift tax laws. This requires early and precise planning. Even in Israel, the tax implications of every action must be carefully examined, including capital gains tax, purchase tax, and income tax.

Before executing any asset transfer – via gift, inheritance, or any other method – it is important to obtain comprehensive legal counsel. Proper planning will preserve the family’s intent and the interests of all parties. It will also ensure long-term economic and intergenerational continuity.

Nimrod Yaron & Co. specialize in personal and professional counsel for clients, families and business owners. We focus on optimal planning and execution of intergenerational transfers, both in Israel and abroad. Our team provides in-depth and personalized legal advice. We tailor creative and efficient solutions to each client’s unique needs.

Clients interested in exploring the options for intergenerational transfer are welcome to contact us for an initial consultation.

To contact us, click here.

FAQ

Can I transfer my residence as a gift to my children and still live in it?

New Framework for the Exchange of Real Estate Information for Tax Purposes

Adam Zur — Thu, 11 Dec 2025 11:42:47 +0000

25 Countries Adopt a New Framework for the Exchange of Real Estate Information for Tax Purposes

A Significant Step Toward Global Tax Transparency: Tax Authorities from 25 OECD Countries to Exchange Real Estate Information

ֿTwenty-five countries have agreed to join a new OECD initiative for the automatic exchange of real estate information between tax authorities. This international initiative aims to reduce tax evasion and enhance transparency in the real estate sector, which is considered one of the primary channels for cross-border investments.

Countries that signed the joint declaration include the United Kingdom, Brazil, Costa Rica, France, Germany, Ireland, Italy, and Spain. The countries stated their intention to join the framework by 2029 or 2030, subject to completion of domestic legislative procedures in each jurisdiction.

The New Framework: Automatic Exchange of Real Estate Information

In October 2025, the OECD published the framework for automatic exchange of real estate information for tax purposes.

The framework provides a structure for countries to automatically and regularly exchange real estate information. It ensures compliance with uniform legal and technical standards. Its goal is to address a growing global challenge – tax avoidance in real estate transactions. Transactions and ownership of real estate assets often involve cross-border elements. This makes it difficult for tax authorities to track derived income. Accordingly, a robust mechanism is required to provide tax authorities with access to information about their resident’s real estate holdings abroad. This enables effective enforcement of tax obligations.

For instance, a French resident living in Paris purchased an apartment in Berlin and rents it. The rental income is taxable in France as the country of residence. It is also taxable in Germany where the income was generated. Absent an automatic exchange mechanism, the French Tax Authority might remain unaware of the property. The owner may fail to report the income. Under the new agreement, Germany will automatically transfer information to France regarding property ownership and derived income. This will facilitate effective enforcement of tax obligations.

The joint declaration stated that this initiative “will enhance our ability to monitor and enforce tax compliance and to combat tax evasion, which undermines public revenues and unfairly shifts the tax burden onto compliant taxpayers.”

Part of a Broader Global Information Exchange System

The new framework joins two previous OECD initiatives for automatic information exchange:

Common Reporting Standard (CRS), developed in 2014, created a mechanism for exchanging information on financial assets held in traditional financial institutions.

Crypto-Asset Reporting Framework (CARF), under which up to 75 countries are expected to begin sharing information on digital asset transactions, starting in 2027 or 2028.

With the adoption of the new real estate framework, an integrated global system has been created. It combines three domains of information exchange: financial, digital, and real estate.

Implications for Investors and Taxpayers

The new framework will affect investors holding real estate assets in participating countries. Automatic information exchange will enable tax authorities in different countries to receive data on real estate assets. This includes ownership details, transactions, and income from properties owned by foreign residents.

This measure is not expected to affect taxpayers who duly comply with reporting obligations. In contrast, taxpayers who have not reported real estate assets or foreign income to date will face greater difficulty. It will be significantly harder to continue evading reporting obligations when information is transferred automatically between tax authorities. In this context, some countries have procedures for settling tax liabilities for previously unreported income.

Recently (August 25, 2025), the Israel Tax Authority published a Voluntary Disclosure Procedure. The procedure provides an opportunity for taxpayers who have not reported their income over the years to settle the reporting and tax liability. This includes interest and indexation differentials accruing from the end of each unreported year until the tax payment date. Taxpayers receive criminal immunity from prosecution. The voluntary disclosure request must be submitted with a brief background and calculations to the Investigations Division of the Israel Tax Authority. Upon receipt of the request, the Investigations Division reviews the taxpayer’s background. It verifies whether the case is under audit, whether an overt or covert investigation is being conducted against the taxpayer, and whether there is any reason not to approve the voluntary disclosure. After the examination, if all findings are satisfactory, the taxpayer receives approval to begin the voluntary disclosure process and to obtain criminal immunity.

This year, our firm published the entry on voluntary disclosure on Wikipedia. To view the entry, click here.

For additional information on voluntary disclosure procedures regarding:

The expected participation of 25 countries in the OECD’s new framework by 2030 represents a significant step toward broader tax transparency in the real estate sector. For investors and international property owners, this is a major development. It requires a fresh review of reporting obligations and compliance requirements.

Real estate owners with foreign holdings are advised to review their tax position. They should ensure compliance with existing reporting requirements. Nimrod Yaron & Co. specializes in consulting and handling matters of international assets, voluntary disclosure, and adapting tax structures to the changing regulatory environment. Contact us for professional and personalized advice.

FAQ

What is the OECD's new framework?

Taxation of venture capital and private equity funds

Adam Zur — Thu, 11 Dec 2025 08:44:40 +0000

In the investment world, there are two principal types of funds operating in the private investment sector: Venture Capital funds and Private Equity funds. Both play a significant role in company growth and economic development. However, they differ in their investments and the stage at which they enter.

The purpose of this article is to explain in a simple, clear, and practical manner how these funds are taxed in Israel. The article outlines the conditions for obtaining tax exemptions for foreign investors. It also highlights the key differences between the two types of funds.

What is a Venture Capital Fund?

A Venture Capital fund is a private investment vehicle that invests in early-stage, high-risk ventures. It primarily focuses on startups with substantial growth potential. A significant portion of the capital used to invest in these companies is raised by foreign and institutional investors.

Beyond capital investment, Venture Capital funds provide professional guidance and strategic advisory services. This is facilitated through their extensive connections across various fields.

In return for their investment, the funds receive equity and sometimes future options. This enables them to benefit from the company’s future success.

Venture Capital funds are a central factor in the technology sector. They contribute to advancing companies that develop innovative products and services. These have the potential to transform existing industries and create entirely new markets.

In Israel, technological development is substantial across various fields such as fintech, cybersecurity, and more. Consequently, numerous startups enter the market seeking growth and future profitability. These companies often raise capital from various investors, including Venture Capital funds.

Tax Arrangement under Section 16(a) of the Income Tax Ordinance – Tax Exemption for Foreign Investors

As noted, a large portion of investors in Venture Capital funds are foreign investors. Therefore, a tax arrangement provides a tax exemption for non-Israeli foreign residents. This exemption is granted under Section 16(a) of the Income Tax Ordinance. It applies only if the fund and foreign investors meet the conditions established by the Israel Tax Authority.

For a fund to benefit from the above tax arrangement, it must satisfy several cumulative conditions detailed in Income Tax Circular 9/2018.

It is important to clarify that the exemption under this circular applies to certain types of income. It does not require that all fund activities be included in the arrangement. Therefore, a fund with mixed income may be exempt on certain income types. Other income will be subject to tax according to Israeli tax laws.

Conditions for Obtaining the Tax Arrangement for a Venture Capital Fund under Circular 9/2018

Number of Investors – The fund must have at least ten investors. They must not be related to each other or part of the general partner. This requirement applies throughout the fund’s entire life.
Investor Distribution – Investors in the fund shall not hold more than 20% of the fund’s equity interests. However, one of the investors may hold up to 35% of the fund’s equity interests. This applies throughout the fund’s entire life.
Investor Composition – Eligible types of investors in the fund are:

Foreign resident investors.
Israeli resident institutional investors – institutional investors exempt from tax under Section 9(2) of the Ordinance.
Israeli resident investors – individuals and/or Israeli resident companies. The tax arrangement does not apply to such investors. It is worth noting that approvals for this tax arrangement apply only when foreign investors exceed 30% of the total investor composition.

4. Investment Commitment Volume – The fund’s investment commitments and actual investments shall not be less than $10 million. At least $5 million of total investments must originate from foreign investors.

5. Investment Diversification – The fund must invest no more than 25% of the total investor financing in a single company.

6. Types of Investments – The fund must invest in qualifying investments. Qualifying investments are investments in Israeli companies, Israeli resident companies, or companies connected to Israel. The connection means their main activity involves establishing or expanding industry and enterprises in Israel. This also includes research and development in various fields such as manufacturing, transportation, agriculture, tourism, water, energy, technology, communications, computing, security, medicine, biotechnology, and nanotechnology. Qualifying activity expressly excludes real estate activity in Israel.

For this purpose, a company connected to Israel is a foreign company whose main assets and/or activity are located in Israel. Nevertheless, no more than 20% of the fund’s total investment amount may be invested in Israeli companies that were publicly traded on the investment date.

7. Minimum Volume of Qualifying Investments in Israel – The fund must invest a minimum amount in qualifying investments. The investments must comply with one of the following alternatives, whichever is lower:

- At least $10 million, with at least $6 million invested in Israeli resident companies and/or foreign companies holding Israeli resident companies.
- At least 50% of the fund’s total investment amount, with at least 30% invested in Israeli resident companies and/or foreign companies holding Israeli resident companies.

8. Separation between Limited Partners and General Partner – Only the general partner may engage in fund management. Limited partners in the fund cannot take an active part in managing the fund or identifying investments. Additionally, limited partners shall not have voting rights in the fund’s investment committee.

As mentioned, these conditions are cumulative. The fund must meet each one of these conditions to receive the relevant tax arrangements under Section 16(a) of the Ordinance and enjoy tax exemption.

According to the above circular, and subject to meeting the detailed conditions, income from realizing qualifying investments will be tax-exempt. This applies to the portion attributable to foreign and institutional investors. For this purpose, income from Venture Capital investments includes capital gains, dividends, and interest.

What is a Private Equity Fund?

Private Equity funds are structured as private limited partnerships. They have a structure similar to Venture Capital funds. It should be emphasized that unlike Venture Capital funds that invest in startups in their early stages, Private Equity funds focus on more established companies. These typically already generate profits. Additionally, in Private Equity funds, investment is usually made through acquiring equity in the target company.

Conditions for Obtaining the Tax Arrangement for a Private Equity Fund under Circular 10/2018

The tax arrangement under Section 16(a) of the Ordinance may also apply to Private Equity investment funds. The conditions are similar to those published in the circular regarding Venture Capital funds, with the necessary adjustments. For this purpose, the Israel Tax Authority published a separate circular for these funds – Circular 10/2018.

Subject to meeting the eight conditions detailed above, income from realizing qualifying investments will also be tax-exempt in Private Equity funds. This applies to the portion attributable to foreign and institutional investors. However, unlike Venture Capital funds, income from dividends and interest is generally not included as tax-exempt income. The relevant laws apply to such income. Dividend income is taxed at 15% for individuals. For non-individual investors, the applicable rate is the corporate tax rate under the Ordinance or the lower rate under a relevant tax treaty. Interest income will also be taxed at the rate prescribed by law.

To conclude, the arrangements established in the Israel Tax Authority circulars (9/2018 and 10/2018) allow tax exemption for foreign and institutional investors. This applies to Venture Capital and Private Equity funds in Israel, subject to meeting cumulative conditions.

Strict compliance with these conditions enables funds to enjoy substantial tax advantages, while maintaining transparency and compliance with Israeli law.

Therefore, every investment fund and foreign investor is advised to seek professional tax advice before making investments in Israel. This ensures full compliance with legal requirements and maximizes existing benefits.

Our firm has extensive experience accompanying some of the largest Venture Capital and Private Equity funds in Israel. We have successfully obtained tax exemptions for foreign investors. Additionally, our firm assists with similar processes, such as capital raising and adding investors. For bespoke professional advice, please contact our Tax Department.

Questions and Answers

What is the main difference between a Venture Capital fund and a Private Equity fund?

Tax Aspects And Proper Planning In Intergenerational Wealth Transfer

Adam Zur — Thu, 11 Dec 2025 08:37:45 +0000

Before determining how your assets will be transferred to future generations, it is crucial to analyze the legal and tax implications of each decision.

Moshe and Rachel saved throughout their lives to secure a better future for their children and grandchildren. Family and relationships between family members were their highest priority.

For most of their lives, Moshe and Rachel resided in a spacious garden apartment. In their later years, they purchased an apartment in a newly constructed tower and relocated there. Additionally, they acquired an apartment in New York using Rachel’s retirement funds.

Moshe and Rachel have three adult children: Avi, Benny, and Galit. Their primary concern was to prevent friction and disputes in the division of their estate. To this end, given Moshe’s deteriorating health, Rachel engaged an appraiser to assess the value of the apartments. The appraiser valued each apartment at 6 million NIS.

The couple executed a will bequeathing one apartment to each child. This appeared to constitute an equal distribution among all children.

Following the couple’s death, the children proceeded to sell the properties. They subsequently discovered significant disparities in their net proceeds. Galit sold the tower apartment, purchased approximately two years earlier, and retained the full 6 million NIS. Avi sold the garden apartment, originally purchased in the 1950s, and paid 25% capital gains tax. His net proceeds amounted to only 4.5 million NIS.

Benny sold the New York apartment. He was required to pay estate tax at a rate of 40%. After tax payments and associated costs, his net proceeds totaled approximately 3 million NIS.

The brothers approached Galit requesting equalization of the proceeds received from the estate. However, her husband objected, asserting that they must adhere to the will’s provisions.

This example demonstrates how taxation can substantially impact the actual value of inherited assets. Therefore, early planning of intergenerational transfer, including comprehensive examination of tax aspects, asset types, and their location, can prevent unnecessary tax liabilities and preserve family relationships.

Intergenerational Transfer of Foreign Assets – International Tax Aspects

Israel currently imposes no estate tax. However, many other countries impose estate or inheritance taxes. For example, in the United States and the United Kingdom, tax rates may reach up to 40%.

Therefore, owners of assets or bank accounts outside Israel are strongly advised to conduct tax planning during the will drafting stage. This prevents unnecessary tax liabilities for heirs.

If you hold foreign assets- whether real estate, securities, or other investments, it is essential to thoroughly examine all legal and tax aspects of transferring assets from abroad to Israel.

You may consider utilizing the STEP-UP mechanism. This allows establishing a new cost basis and acquisition date for assets bequeathed by a foreign resident. This can significantly reduce future tax liability.

Additionally, attention must be paid to verification of the source of funds, assistance in transferring them to Israel, and understanding the tax structure in the country of origin. Such planning helps prevent double taxation.

Estate Distribution Agreement

Sometimes heirs choose to divide the estate differently from what was stipulated in the will. They accomplish this through an estate distribution agreement. This agreement allows considerable flexibility and grants heirs broad discretion. It may even override the will’s provisions. Such an agreement may help resolve disputes and prevent inequitable distribution of the estate.

Gift or Inheritance – Which Is Preferable?

Before deciding whether to transfer an asset as a gift or bequeath it as part of the estate, you must examine the legal and tax implications of each option.

Sometimes a gift is preferable regarding purchase tax or capital gains tax. However, remember that the law imposes time limitations on tax exemptions for apartments transferred as gifts. Additionally, a gift for which consideration is provided in return does not constitute a gift for tax purposes.

Trusts

One effective method for transferring wealth to future generations is establishing trust. A trust is a legal arrangement- a contractual agreement, allowing the testator to retain limited control over asset management even after death.

Specific conditions may be established. These include restricting the sale of an asset for a defined period or transferring the asset only after certain conditions are satisfied. This ensures that asset transfer is executed according to the testator’s wishes.

Transfer of a Business or Company Shares

The decision whether to transfer a business or company shares during the testator’s lifetime or as part of a will depends on the family’s personal and business circumstances.

You must examine who will manage the business, under what conditions, and whether there is a need to draft a shareholders’ agreement or establish control mechanisms.

Business losses cannot be transferred through inheritance. Therefore, early tax planning is critically important, particularly when dealing with a complex portfolio of businesses and assets. In many cases, intra-group or intra-family transactions can be executed for optimal future tax planning.

In Summary, Intergenerational transfer is a complex process. It requires early planning, thorough examination of legal and tax aspects, and utilization of legal tools such as trusts, estate distribution agreements and enduring powers of attorney. Proper planning can prevent family conflicts, ensure equitable distribution of assets, and reduce unnecessary tax liabilities.

The team of attorneys and accountants at our firm provides comprehensive advisory and representation services to clients. This ranges from the asset transfer planning stage and will drafting to their realization by heirs. We emphasize customized solutions and optimal tax reduction.

Nimrod Yaron & Co. specializes in intergenerational asset transfer planning and provides personalized and professional counsel.

For an initial consultation – contact us.

Questions and Answers

Why do I need to examine tax considerations when planning asset transfer to my children?

Comprehensive Reform of Taxation in Israel’s High-Tech Sector – Changes to Corporate and Employee Taxation

Adam Zur — Thu, 04 Dec 2025 15:02:17 +0000

The Tax Authority’s Effort to Reduce Tax Uncertainty in Israel’s High-Tech Industry

On Sunday, November 2, 2025, the Ministry of Finance announced a comprehensive reform of taxation for the high-tech sector at a press conference. The reform was initiated jointly by the Ministry of Finance, the Israel Tax Authority (ITA), and the Israel Innovation Authority. Its main goal is to provide certainty for individuals and companies operating in the industry.

The reform addresses three areas: venture capital funds, high-tech companies and industry employees. This article focuses on the expected changes for companies and employees. To read about the changes related to venture capital fund taxation, click here.

The high-tech industry is Israel’s main growth engine. The authorities and the Ministry of Finance aim to preserve and enhance Israel’s attractiveness for these companies. The reform includes legislative changes and clarifications, as well as new ITA procedures. Some have already been published, while others are expected soon.

Changes in Corporate Taxation for High-Tech Companies

The changes in corporate taxation relate to two main areas. Mergers and acquisitions, and the operation of R&D centers in Israel.

Mergers and Acquisitions

Many acquisitions are carried out by merging the acquired company into the acquiring company’s corporate structure. Under Amendment 279 to the Tax Ordinance, published in early 2025, several relaxations were introduced to the conditions for executing tax-exempt mergers. The required size ratio between the acquiring and acquired companies was changed from 1:9 to 1:19, allowing the acquisition of smaller companies.

In addition, the portion of the transaction that shareholders can receive in cash increased from 40% to 49%. Shareholders may also sell the acquiring company’s shares immediately, without a waiting period of several years.

The ITA Commissioner stated that since the change took place, many companies have submitted merger applications under the new framework.

R&D Centers

Many companies operate in Israel through R&D centers. An R&D center is a company primarily engaged in providing research and development services to its foreign parent company (or another foreign group company). The payment received by the R&D center is based on a cost-plus method, meaning the payment equals its expenses plus a fixed profit margin. For example, if a 5% margin is set and relevant expenses are 100, the R&D center will receive 105 and retain a profit of 5.

In recent years, it has been argued that R&D centers generate a much greater share of the group’s profits than currently recognized. As a result, tax assessors have been reviewing whether the pricing method properly reflects their contribution. If the assessor determines that it does not, an assessment may be issued.

Such assessments increase the amount attributed to the Israeli R&D center. Either by setting higher profit margins or by shifting to a profit-split method, dividing the parent company’s profits between it and the R&D center. These changes increase the R&D center’s profits and its tax liability in Israel.

These discussions have created uncertainty among multinational companies operating in Israel. These companies operated under the assumption that they knew their expected tax liability. Tax assessments can now significantly alter that expectation. This uncertainty has raised concerns about continuing to operate in Israel, a situation the government seeks to avoid.

To address this, the ITA published a circular in February 2025, followed by the final version published on November 2^nd. The main points of the circular (subject to its conditions) are:

If a tax assessor wishes to issue an assessment to a company meeting the circular’s conditions, approval will be required from the Professional Division, the Deputy Commissioner for Planning and Economics, the ITA’s Professional Advisor, and the ITA Commissioner. The specific approvals depend on the case.
IP Exit from Israel- foreign companies acquiring Israeli firms often wish to transfer their intellectual property (IP) out of Israel. This raises valuation disputes. Under the circular, the ITA determines that, subject to compliance with its terms, the IP value will be up to 85% of the transaction value (less costs and additional payments). This eliminates claims of inflated valuations such as 120%. The company must apply to the Professional Division for approval and certainty. The division will confirm that, by the end of the seventh tax year following the transaction closing, the profit attribution method for R&D activity will remain cost-plus.
Private Tax Ruling- a company may request a ruling confirming that its R&D service pricing is at arm’s length. An Israeli company providing R&D services to a non-Israeli related party may apply to the Professional Division for approval.
Advance Pricing Agreements (APA)- if the foreign party is resident in a country with which Israel has a double taxation treaty, the Israeli company may request a bilateral or multilateral APA regarding its transfer pricing policy.

In his speech, the ITA Commissioner elaborated on the circular and clarified several issues. He explained that since rulings often take a long time, a time limit was introduced to encourage taxpayers to use this route. The ITA must respond within 180 days; if no response is provided by then, the company’s position will be automatically accepted.

The Commissioner also addressed additional topics:

Marketing Intangible under the Law for the Encouragement of Capital Investment– a tax assessor wishing to address marketing intangible issues under this law must obtain approval from the Professional Division Manager.
Pillar 2- in July 2024, the Ministry of Finance announced that starting in 2026, Israel will implement a global minimum corporate tax rate of 15%. The ITA is currently preparing clarifications on how this will affect industry companies.
The QSBS Issue under President Trump’s Tax Reform- the ITA will publish its position on this matter in the coming weeks.

Taxation of Israeli High-Tech Employees Returning to Israel

It is common in the high-tech industry for employees to relocate abroad for several years. In most cases, these employees hold stock options that may begin vesting while they are outside Israel. Currently, when they exercise the options after returning to Israel, they are taxed on the full amount, without considering the period spent abroad.

Accordingly, they are taxed at their marginal rate upon exercise (since these are not options under the capital gains track of Section 102 of the ITA). This situation has led many Israelis to delay their return until after exercising their options. To encourage Israelis to return sooner, the reform introduces significant changes. It offers two options to ease the tax burden:

Request to split the profit period between Israel and abroad, so that the portion vested abroad is not taxed in Israel.
Change the options track from employment income to capital gains, significantly reducing the tax liability.

Note: This does not apply to new immigrants or veteran returning residents, but only to Israelis who spent a few years abroad.

The tax reform introduces extensive changes to the taxation of the high-tech sector and demonstrates Israel’s commitment to the industry’s growth. It also reflects the government’s desire to attract and encourage investment in Israel and Israeli companies.

Nimrod Yaron & Co.- Israeli and International Taxation advises funds, high-tech companies, investors, and employees in the high-tech sector on tax planning tailored to their specific circumstances. To contact a representative from our firm, click here.

FAQ

When will the reform take effect?

Comprehensive Reform of Taxation in Israel’s High-Tech Sector – Changes to the Taxation of Venture Capital Funds

Adam Zur — Thu, 04 Dec 2025 14:33:51 +0000

The Tax Authority’s Attempt to Combat Tax Uncertainty in Israel’s High-Tech

On November 2, 2025, the Ministry of Finance, together with the Tax Authority and the Innovation Authority, announced a comprehensive reform of taxation. The reform aims to provide certainty and preserve and improve Israel’s competitiveness for the high-tech industry. The reform addresses three dimensions, venture capital funds, high-tech companies, and industry employees. This article focuses on the expected changes in venture capital fund taxation. To read about the expected changes for companies and industry employees, click here.

The high-tech industry is a central growth engine in Israel. Venture capital funds are the main investors in the industry. The funds enable young, high-risk companies to raise capital and continue expanding their operations. Therefore, to maintain industry growth, it is important to encourage and facilitate venture capital fund activity in Israel.

Venture capital funds entered Israel in the 1990s. Despite their presence in Israel, they had no certainty regarding their taxation. Thus, fund investors, including foreign investors seeking this certainty, had to approach the Tax Authority. The approach is through rulings- an expensive and lengthy process.

For the first time, as part of the reform of taxation and to encourage investment in Israel, the taxation of venture capital funds is being regulated. This is through new legislation and regulations expected to be published by the end of 2025. The changes address the taxation of the General Partner (GP) and the Limited Partner (LP).

Changes in General Partner (GP) Taxation in Venture Capital Funds

The General Partner in a venture capital fund is essentially the partner managing the fund. The new reform distinguishes between an Israeli resident General Partner and a foreign resident General Partner.

Until now, the taxation of carried interest for an Israeli resident General Partner depended on the identity and composition of investors. The tax ranged from 25% to 50%. The more exempt/foreign investors, the lower the taxation. This created a preference for foreign capital over local capital.

To correct this, under the reform, carried interest taxation will not depend on investor identity. It will stand at 27%. Additionally, carried interest will be classified as income from personal exertion. This means the surtax rate applied will be the lower rate, which stands at 3% for 2025. Furthermore, VAT on carried interest has been canceled.

It is very common for investors to require skin in the game from the General Partner. This means they also invest alongside them, typically in single-digit percentages. Without a ruling, this investment was taxed at full marginal tax. The presented change is to treat profits from this skin in the game (if invested up to 10%) as capital gains taxed at 10%.

A foreign resident GP was taxed at 15% on carried interest. This tax has been reduced to 10%. VAT on carried interest for the foreign resident GP will also be canceled. Skin in the game will also be considered capital gains for them. According to Section 97(b3), will be exempt from tax in Israel.

Changes in Limited Partner (LP) Taxation in Venture Capital Funds

Limited Partners in a venture capital fund are passive investors. The reform distinguishes between an Israeli resident Limited Partner and a foreign Limited Partner.

Passive investments by an Israeli resident Limited Partner, without a ruling, were taxed as business income. Under the reform, if the investment is in an Israeli resident technology company, regardless of the investment method (through a fund, directly, etc.), the profit will be taxed as capital gains.

A foreign resident LP sometimes faced claims of permanent establishment and classification of activity as active. Under the reform, like an Israeli LP, the profit will be viewed as capital gains. It will be exempt from tax in Israel.

Comparison of Tax Rates Before and After the Reform

Partner Type	Current Status	Change Under Reform	Notes
Israeli GP	Carried interest tax- 25% – 50% (depending on investor identity) + VAT Skin in the game- marginal tax	Carried interest- 27% + VAT cancellation Skin in the game- capital gains tax	The reform establishes a fixed tax rate regardless of investor origin
Foreign GP	Carried interest- 15% + VAT	Carried interest- 10% + VAT cancellation Skin in the game- exempt from tax in Israel
Israeli LP	Taxation as business income	Capital gains tax- 10%	Relevant only to investments in Israeli technology companies
Foreign LP	Discussions about permanent establishment/reclassification of activity as active	Defining profit as capital gains- exempt from tax in Israel	Relevant only to investments in Israeli technology companies

*The numbers presented in this table refer to situations where no ruling was obtained.

For further reading on current venture capital fund taxation, click here.

The tax reform presents extensive changes in high-tech industry taxation. It demonstrates the State of Israel’s commitment to high-tech industry growth. It also shows the desire to attract and encourage investments in Israel and Israeli companies. Its significant advantage is the certainty it provides. Under the reform, there will be no need to apply for a lengthy and expensive ruling. Instead, they will know directly what the relevant taxation is.

Nimrod Yaron & Co. – Israeli and International Taxation, accompanies companies, funds, investors, and employees in the high-tech industry. We provide comprehensive solutions to their relevant tax issues. To contact a representative from our firm, click here.

FAQ

When will the reform take effect?

Transfer Pricing Reporting and Documentation Obligations in Israel – A Complete Guide

Adam Zur — Thu, 04 Dec 2025 14:20:23 +0000

Documentation and reporting are fundamental pillars of transfer pricing compliance. Without proper documentation, a company may struggle to demonstrate adherence to the arm’s length principle. Clear reporting and documentation obligations exist in Israel and numerous countries worldwide. A thorough understanding of these obligations is essential for compliance. This article provides a comprehensive overview of transfer pricing reporting and documentation obligations in Israel.

The Three-Tiered Approach to Documentation

In most countries, transfer pricing documentation follows the three-tiered approach introduced by the OECD. This framework was established under the BEPS (Base Erosion and Profit Shifting) project. It prescribes documentation obligations that scale with the multinational group’s consolidated revenues.

The three tiers are:

Local File, also referred to as a transfer pricing study or market conditions analysis.
Master File.
Country-by-Country Report (CbCR).

What is a Local File (Transfer Pricing Study)?

The first tier of documentation is the Local File. It is the most relevant to most companies. In Israel, this is commonly known as a transfer pricing study or market conditions analysis. This document focuses on cross-border transactions between the Israeli entity and its related foreign parties.

Its purpose is to provide detailed information on these transactions. The focus is on their pricing methodology. While the document includes certain information about the broader group structure, its primary emphasis remains on the specific transactions of the local entity.

In Israel, the required content of a transfer pricing study is based on OECD guidelines. It is detailed in the Israeli Income Tax Regulations for Determining Arm’s Length Conditions.

Globally, various threshold values exist for the obligation to prepare a Local File. Not every company conducting international transactions is required to prepare one. However, in Israel, the obligation to prepare a transfer pricing study applies to every international transaction between related parties. This applies even if the transaction value is relatively low.

In most countries, there is no obligation to submit the study automatically with the annual tax return. Submission is required only following a specific request from the tax authority. In such cases, the document must be provided within a predefined timeframe. This typically ranges between 30 and 90 days. In Israel, the study must be submitted to the Israeli Tax Authority within 30 days of receiving a request.

Master File

The Master File focuses on the activities of the multinational group as a whole. Its purpose is to provide a comprehensive overview of the group’s business operations. This includes a description of the group’s transfer pricing policies, principal profit drivers and intangible assets portfolio. It also includes additional relevant information.

The obligation to prepare a Master File generally applies to relatively large corporate groups. Small and medium-sized enterprises are typically exempt. In Israel, the Master File obligation was introduced under Amendment 261 to the Israeli Income Tax Ordinance. Effective from the 2022 tax year, an Israeli company that is part of a multinational group is required to prepare this documentation. This applies if the group’s revenues reached 150 million NIS or more in the preceding year.

Similar to the Local File, most countries do not require automatic submission of the Master File. Submission is required only upon request from the tax authority. This is also the case in Israel.

Country-by-Country Report (CbCR)

CbCR represents the highest level of documentation. It is relevant to very large multinational groups. Its purpose is to provide tax authorities with comprehensive information on the distribution of revenues, profits, taxes paid and economic activities. This information covers all group entities across all countries. Unlike the Local File and Master File, the CbCR must be filed annually.

Most OECD member countries adopted the CbCR filing obligation in 2016. In Israel, the obligation was introduced under Amendment 261 to the Israeli Income Tax Ordinance. It applies effectively from the 2022 tax year.

Groups with consolidated revenues of 750 million EUR or more (or an equivalent amount in the local currency) are generally required to file the report. Filing occurs in the countries of the group’s ultimate parent entity. In Israel, if the ultimate parent entity is an Israeli tax resident and group revenues exceed 3.4 billion NIS, a filing obligation in Israel applies.

Documentation Obligations – Summary Table

Type of Documentation	Revenue Threshold for Preparation	Submission Deadline	Notes
Transfer Pricing Study (Local File)	Every international transaction between related parties	Within 30 days of the Assessing Officer request	Focuses on specific transactions of the local entity
Master File	Group revenues exceeding NIS 150 million	Within 30 days of the Assessing Officer request	Comprehensive overview of the group and its policies
CbCR	Group revenues exceeding NIS 3.4 billion	Within 12 months from the end of the tax year	Details distribution of revenues, taxes, and activities by jurisdiction

Additional Documentation Obligations

Beyond the three-tiered documentation framework, companies are required to maintain supplementary supporting documentation. This is necessary to substantiate compliance with the arm’s length principle. Such documentation includes intercompany agreements, invoices, and any other documents relevant to transaction pricing. Maintaining these documents is crucial to substantiate compliance before the Israeli Tax Authority when required.

Reporting in Annual Tax Returns

In addition to documentation obligations, companies are typically required to provide information about intercompany transactions. This information is included in their annual tax returns submitted to tax authorities.

In Israel, the following forms must be attached to the annual tax return, as applicable:

Form 1385 – Declaration of International Transactions. Companies and individuals with transactions involving related foreign parties must file this form. The form includes information about the transaction and its pricing.
Form 1485 – Declaration Regarding Loans in International Transactions. Companies that elected to issue capital notes to related companies pursuant to Section 85A(6) must file this form.
Form 1585 – Declaration of Affiliation with a Multinational Group. Companies that are part of a multinational group (as defined in Section 85A) are required to declare this status. They must also provide details about the group.
Form 1686 – Country-by-Country Report (CbCR) pursuant to Section 85C(3) of the Israeli Income Tax Ordinance. This form is filed by Israeli ultimate parent entities of multinational groups. It applies to groups with revenues of 3.4 billion NIS or more.

Practical Example – ABC Group

ABC Group is a multinational group operating in 20 countries worldwide. Its consolidated revenues amount to 5 billion NIS. Israeli company abc heads the group and serves as the ultimate parent entity. British company XYZ and American company INC provide distribution services to it.

What documents and forms will ABC Group need to prepare and file in Israel?

First, abc Company must prepare a transfer pricing study. This study addresses the distribution services provided to it by XYZ and INC.

Additionally, because its revenues exceed 150 million NIS, it must also prepare a Master File.

Finally, since the group’s revenues exceed 3.4 billion NIS and the ultimate parent entity is an Israeli tax resident, the company must prepare and file a Country-by-Country Report.

Regarding the forms abc Company must attach to its annual tax return:

Form 1385 – for transactions with XYZ and INC.
Form 1585 – To report its classification as a multinational group.
Form 1686 – to file the Country-by-Country Report.

Companies engaged in cross-border-related-party transactions must ensure full compliance with the arm’s length principle. They must price transactions at market conditions. Proper documentation and reporting as required by law are essential. Non-compliance with these obligations may result in administrative penalties. It may also create a heightened burden of proof before the tax authorities and substantial tax exposure.

Nimrod Yaron & Co. – Israeli and International Taxation specializes in transfer pricing. The firm provides comprehensive professional support for all transfer pricing matters. To contact a representative from our firm, click here.

FAQ

Is it necessary to submit a transfer pricing study with the annual tax return in Israel?

Intergenerational Transfer and Estate Administration

Adam Zur — Thu, 04 Dec 2025 13:38:00 +0000

Intergenerational transfer is among the most significant and strategic decisions a family or wealth holder can make. It is a legal, economic, and emotional process. Its purpose is to ensure that family wealth is transferred in an orderly, fair, and lawful manner to the next generation. This process preserves family unity, reduces tax exposure, and ensures business and economic continuity.

Many assume that intergenerational transfer occurs only after a person’s death. In practice, however, it is a process that can and should begin during the asset owner’s lifetime. Through early planning, it is possible to make gifts, establish trusts, arrange ownership in family companies, and set up future management mechanisms. This ensures the continuation of business and family activity.

When the process is not managed properly, it may result in disputes and delays in estate distribution. It may even cause substantial damage to asset value. Professional estate administration serves as a legal mechanism that actively supports and streamlines the transfer of assets. It protects the interests of all parties involved. It also ensures the testator’s wishes are duly fulfilled.

Estate administration is designed to provide a practical solution to problems that may arise after a person’s death. It fosters certainty, transparency, and trust among all stakeholders. Additionally, it allows for the precise fulfillment of the testator’s wishes. It maintains proper relations among heirs and protects assets from errors, claims, or creditors.

What is an Estate and What Does Its Administration Include?

An estate includes all assets, rights, and obligations remaining after a person’s death. These are intended for distribution among heirs or beneficiaries according to a will. Proper estate administration is an integral part of intergenerational transfer. It ensures that assets are managed and distributed according to the testator’s wishes. It also ensures fair treatment of all heirs.

When a will exists, estate distribution is carried out according to the will’s instructions. If there is no will, distribution is performed according to the provisions of the Inheritance Law. This law determines the order of heirs and each person’s share.

Estate Administration – How It Works in Practice

Estate administration is a legal process designed to arrange the distribution of the deceased’s assets and settle debts. It ensures each heir receives their share according to the will or law. To accomplish this, an application must be filed with the Inheritance Registrar or the Family Court in Israel. The application seeks to appoint an estate administrator, locate the deceased’s assets, settle debts and arrange the transfer of assets to heirs. An application for appointment of an estate administrator can be filed before or after receiving a Succession Order or Probate Order.

It is also possible to appoint an estate administrator in advance through a will. In such a case, the testator specifies in the will who will be responsible for administering the estate after death. Such an appointment gives the testator control over the identity of the person who will manage their property. It prevents disputes among heirs after death. It also ensures that estate administration is carried out according to their precise wishes. The court tends to honor the testator’s wishes and appoint the person designated in the will. This is done unless there is a legal or practical impediment.

The Estate Administrator and their Duties

The estate administrator’s role includes collecting all estate assets and paying the deceased’s debts. It also includes distributing the remaining assets among heirs. The estate administrator operates under supervision designed to ensure transparency, accountability, and proper management of the deceased’s assets. This preserves the heirs’ trust and the integrity of the entire process. In certain cases, the estate administrator and heirs may reach an agreement on the method of estate distribution. This may differ from what is specified in the will or Succession Order. Such agreements are valid provided they are made in good faith and with court approval.

When Is It Recommended to Appoint an Estate Administrator?

Appointing an estate administrator is particularly recommended when a professional and neutral party is needed to manage assets. This ensures their fair distribution. This is especially true in cases where the estate includes substantial property, foreign assets, or family companies. It is also critical when there are conflicts among heirs. In such situations, self-management by heirs may lead to delays and lack of transparency. It may even result in a decrease in asset value. A professional estate administrator enables efficient process management and maintains balance among parties. This prevents deterioration into prolonged legal disputes.

Estate Administrator’s Fee and Supervision of Their Work

According to law, the estate administrator’s fee shall not exceed 3% of the estate’s value. The court considers several factors when determining the fee. These include the total asset value, type of assets, and the nature and scope of actions performed by the estate administrator.

In cases where special effort was required or exceptional actions were performed, the court may increase the fee. However, it shall not exceed 4% of the estate’s value.

Before executing asset transfers – whether by gift, inheritance, or any other means – it is essential to obtain comprehensive legal guidance. Proper planning preserves the family’s wishes and the interests of all parties. It also ensures lawful and sustainable intergenerational continuity for the long term. There is no one-size-fits-all solution. Each family and each asset requires individual examination and personalized planning. This ensures proper, efficient, and lawful transfer of family wealth.

Intergenerational wealth transfer is not limited to writing a will or making a gift. It is a broad and complex process where every decision can materially affect the outcome. Today, various legal and economic tools are available for intergenerational transfer. These include trusts, family agreements, enduring powers of attorney, wealth management mechanisms, prenuptial agreements, family mediation, and international tax solutions. A wise combination of these tools can ensure control is maintained and tax exposure is reduced. It also enables the orderly transfer of family wealth to future generations.

Nimrod Yaron & Co. specializes in personal and professional guidance for intergenerational wealth transfers and estate administration. The firm’s team provides comprehensive and personalized legal counsel. This incorporates advanced legal tools such as trusts, family agreements, enduring powers of attorney, wealth management mechanisms, and international tax solutions.

For an initial consultation – contact us.

FAQ

When is it advisable to start planning intergenerational transfer?

Tax Aspects of Inheritance in Spain

Adam Zur — Thu, 04 Dec 2025 12:31:52 +0000

If you own assets in Spain (Barcelona, Madrid, etc.) or are expected to inherit assets in this country, it’s important to understand the legal and tax implications involved in the inheritance process. Each region in Spain has different laws regarding how inheritance tax is charged. This often creates confusion for taxpayers, especially when assets are transferred between different provinces or when dealing with property owners in multiple jurisdictions.

Early understanding of local law, and advance planning of wills, residency, and lifetime gifts can significantly reduce tax exposure when transferring assets between generations.

Beyond that, inheritance tax planning can prevent legal disputes, delays in the inheritance process, and unexpected demands from various authorities.

What is the difference between Estate Tax and Inheritance Tax?

Estate tax – imposed on the deceased’s assets before they are transferred to heirs.
Inheritance tax – applies to all assets received by the heir.

Inheritance Tax in Spain – What You Need to Know?

Spain has no estate tax, but there is an inheritance tax on assets transferred to heirs.

Spanish residents are taxed on all assets and rights they receive worldwide – whether located inside or outside Spain. In contrast, heirs who are not Spanish residents are taxed only on assets located in Spain or realizable there.

Tax rates are progressive, ranging from 7.65%-34%. In Spain, several benefits and exemptions exist. These depend on specific circumstances such as family relationships, disability, life insurance, family business, and permanent residence.

Tax liability is determined based on the net value of assets transferred to the heir – meaning the asset’s value minus liabilities. Tax liability is calculated per the competent region’s legislation on the net asset value received. If the region has not set specific rates, national rates apply. However, the Basque Country and Navarre have separate tax systems where national rates do not apply.

Each region in Spain may also enact tax reductions, which can significantly reduce tax liability. For example, Madrid grants a 99% tax refund for inheritances and gifts received by certain family members.

Gift Tax

Gift tax is an important part of intergenerational asset transfer planning. Often, when property owners learn the inheritance tax amount, they consider transferring assets as gifts during their lifetime. They believe this is preferable to future inheritance. However, gifts may be taxed at rates identical to inheritance tax or even higher.

In Spain, gift tax applies similarly to inheritance tax. Like inheritance tax, gift tax is calculated per specific circumstances such as family relationships and permanent residence.

Therefore, advance planning of inheritance tax and gift tax is essential when transferring assets between generations. Proper planning maximizes existing exemptions and significantly reduces tax liability. It ensures assets transfer to the next generation in an orderly and efficient manner.

Inheritance Taxation in Israel Compared to Spain

In Israel, unlike Spain, there is no estate tax or inheritance tax. However, in certain cases, tax may be imposed on the full inheritance value. For example, capital gains tax applies upon asset sale.

The Israel-Spain tax treaty includes provisions preventing double taxation. However, accurate reporting and filing planning is essential to avoid double payment.

To read the Israel-Spain tax treaty in Hebrew on the Ministry of Finance website, click here.

Drafting a Will in Spain – The Key to Tax Savings and Dispute Prevention

Inheritance doesn’t always pass smoothly to heirs. Sometimes complex procedural steps are needed to obtain a probate order or permit to realize assets.

Drafting an orderly will is not just a matter of personal wishes; it’s an integral part of estate taxation. A detailed will can ensure assets pass smoothly and efficiently to heirs. The will should include the deceased’s wishes but must align with legal requirements. This ensures its validity is not compromised.

At the will drafting stage, in many cases you can choose which law will apply to it. This choice can have a substantial impact on inheritance planning and its future realization.

Without advance planning (inheritance without a will), the applicable law will be that of the deceased’s last and principal residence.

If you own assets in Spain, our recommendation is to draft a will to ensure the transfer of assets is done as smoothly as possible. A will can prevent misunderstandings or lengthy legal processes. It ensures the process proceeds in an orderly manner even after the deceased’s death.