the issue of the termination of residency in Israel and the new form issued by the Tax Authority for this purpose.
One of the main questions arising when someone decides to relocate is what are the implications of Israeli taxation?
Among the most common issues that arise are the implications of National Insurance:
- Whether to continue to pay National Insurance and health insurance contributions?
- If so, for how long?
- What happens if you stop?
- Etc…
Similarly, is there a question of taxes applicable to the income generated in the country to which they are relocated:
- What about the extra revenue?
- What is the concept of “residency”
- What is “separation of residency”?
These and other questions have been partially addressed in the extensive paragraph on the subject.
Recently, the Tax Authority took an additional step in the matter of taxation after relocation and the termination of residency for tax purposes. A new form has been published as an appendix to the annual report for an individual (Form 1348) “Residency Statement for the tax year_______“. You will be able to view and download the form from this link.
Purpose of the new form
In accordance with the Income Tax Ordinance, an individual resident of Israel must submit a report, in Israel, and when he claims that he has severed his Israeli residence due to the transfer of his/her center of life from Israel. He/she will be required to file a report Detailing proving the facts on which his claim of non-residency claim is based. Documents supporting this claim should be attached to the report.
Until this form was issued, no specific document was available for this purpose. As a result, a number of different approaches were taken to meet the requirements of the law’. The new form will now resolve how to report and replaces all other approaches.
Although the form has already existed from the filing of the 2016 tax report, is unknown to many individuals, therefore, it is important to us that you be aware of it’s existence.
Who can/should submit the form?
A person who has relocated should determine whether he is still a resident of Israel using the number of days spent there as a test.
The “days test” will also be examined during the transition to or from Israel. A person is considered a “resident of Israel” if they have a strong “center of life” there. The following criteria are used as a measurement:
- A stay of 183 days or more in Israel during the tax year,
or
- If the taxpayer spent less than 183 days in Israel, but more than 30 days during the tax year, the individual will be considered a resident of Israel according to the test when he/she has spent 30 days or more in Israel in the specific tax year and the total period of their stay in Israel in that tax year, and in two years preceding it, amounts to 425 days or more.
If a person meets one of the above-mentioned criteria, that individual is liable to tax in Israel. If the individual claims otherwise, by reason of relocation, that individual must complete the new form.
In summary, since most of the individuals involved in a relocation are deemed as residents of Israel according to the above tests, they have to submit the new form in Israel,
“I am not a resident of Israel but the amount of time I have spent in Israel qualifies me as one, which I dispute”. If you fit this category, then you must submit the new form under section 131 (a) (5) of the Ordinance.
It should be emphasized that this publication does not constitute a substitute for professional advice.
Do you have a client who could be supported by our international tax consulting activities? Contact us: Irit.s@www.bakertilly.co.il
