August 3, 23

NEWS / Israel Justice Ministry proposes changes to tax residency rules

A new Israeli bill proposed by the Ministry of Justice seeks to introduce more clarity to the definition of Israeli tax residency. The bill downgrades the role of the “center of life” test and instead focuses on the number of days a given individual spends in Israel. The move is aimed at reducing uncertainty and friction between taxpayers and tax officials. Under the proposed new regulations, an individual who spends 183 days during any 2-year period, 100 days during the tax year, and 450 days over 3 tax years would be deemed a tax resident of Israel, unless the individual is also a resident of a “reciprocal country”. If an individual is married to an Israeli tax resident, it would be sufficient for that person to spend a mere 100 days during the year (without meeting the other requirements) to be deemed an Israeli tax resident. Under current regulations, the primary determining factor for a given individual’s tax residence status in Israel is their “place of vital interests”. The test is backed by a rebuttable presumption that a person is an Israeli tax resident if they have stayed in Israel for at least 183 days during the tax year in question, or if they were present in Israel for at least 30 days during the tax year and a grand total of 425 days during a 3-year period that includes that year and the 2 preceding years. The bill therefore increases the role of the more objective factor of the number of days spent in Israel and reduces the role of the more subjective factor of “place of vital interests”. The bill is based on recommendations from the Committee to Reform International Taxation, set up in September 2021, which includes representatives from the Israeli Tax Authority, the Institute of Certified Public Accountants, and the Israeli Bar. Public comments on the proposals can be submitted until August 8, 2023. You can read the original story at the following link. We can help you prove your US tax residency if you are spending considerable time in Israel or any other country.