Income Tax Regulations (Determining Individuals Considered as Residents of Israel and Determining Individuals Not Considered as Residents of Israel)

An individual will be considered an Israeli resident or foreign resident as defined in section 1(2) of the Income Tax Ordinance (hereinafter the Ordinance), which is determined through various conditions that decide the individuals center of life. The regulations detailed below expand on the guidelines for establishing foreign residency or classifying an individual as a resident of Israel for tax purposes.

Definitions

• The definitions of “foreign athlete” and “foreign journalist” are found in section 75a of the Ordinance.
• The definition of “new immigrant” can be found in section 35(d) of the Ordinance.
• The term “military service” refers to any type of military service, including soldiers in military career service (‘Kevah’ in Hebrew) (i.e. active mandatory service or reserve service).

Cases in which an Individual is Considered a Resident of Israel

Even someone who is not defined as a resident by the terms in section 1(2) of the Ordinance, can be considered as one if the following conditions apply:

1. The individual is a government employee, provided they began their employment as a government employee while being a resident of Israel; (it is important to note that the regulation does not address residency status of the spouse of a government employee.)
2. The individual is employed by one of in one of the following, listed in section 19(a)(4) of the Ordinance:

• A local authority in Israel
• The Jewish Agency in Israel
• The Jewish National Fund (JNF)
• Karen Hayesod (United Israel Appeal)
• A government owned company
• A state authority or corporation established by law

This applies only if the individual began their employment at one of the employers listed above while still a resident in Israel, and no more than five years has passed since the start of their employment. Therefore, in certain cases we help ensure that an individual terminates their residency status before the start of their employment!

Cases in Which an Individual Will Be Considered a Foreign Resident

An individual deemed a resident under sections 1(a)(1) and 1(a)(2) of the Ordinance, will be considered a foreign resident if they meet one of the following criteria:

1. A diplomat or consul of a foreign military, along with their spouse and children residing with them.
2. A soldier in a foreign army or someone servicing in a UN mission.
3. An individual who came to Israel for military service in the IDF (mandatory service or reserve service, excluding military career service), until the end of their service, provided they have submitted a request to be considered a foreign resident.
4. A student that comes for their studies, provided they submit a request to be considered a foreign resident, this status is only granted for the first three years of their stay in Israel.
5. An individual who comes to Israel as a teacher, lecturer, or researcher at an educational institution, this status is only granted for the first three years of their stay in Israel.
6. A religious leader coming to Israel to serve in a religious role, this status is only granted for the first three years of their stay in Israel.
7. An individual hospitalized in a hospital or rehabilitation institution, where the hospitalization period results in a prolonged stay in Israel.
8. A foreign journalist or foreign athlete, as defined above, this status is only granted for the first three years of their stay in Israel.

As can be seen, there are few cases where, despite the relatively straight-forward definitions in the Ordinance, it is necessary to further asses if an individual is a resident of Israel or a foreign resident.

For an assessment of specific cases, you can contact our firm here.