Personal Status Lawyers
Disconnection of residency for income tax and social security purposes
Many people move abroad for different periods of time and upon their return to Israel find that they have an income tax debt for the entire period of their stay outside Israel. In order to avoid this situation, it is important to Disconnect residency for income tax purposes. Disconnecting residency for income tax purposes is a very complex procedure, with many aspects. Therefore, it is important to enlist the help of an experienced, who will handle this procedure for you.
By Igal Mor, Adv. & Notary
Accuracy in Legal Advice. Excellence in legal support.
Income tax liability
One of the significant obligations imposed on us as residents of Israel is the payment of income tax. But what happens when we go abroad for an extended period of time, for work, vacation, studies or for any other reason? It may seem very clear: as long as we do not live in Israel, we will not be liable to income tax, this assumption, however, is wrong. The starting point of the Tax Authority is that a resident of Israel continues to be a resident even if he stays outside Israel for a prolonged period of time, and therefore is liable to be taxed. This is unless he works to sever the residency and is recognized as a foreign resident. As will be explained below, the determination of residency by the Tax Authority is based on two different factors.
Determining residency
An Israeli resident applying for recognition as a foreign resident by the Tax Authority will be required to pass two tests: the center of life test and the days test. The first test examines where the center of the taxpayer’s life is. That is, where he and his family members live, what is his source of income, where his assets are and similar inquires of this nature. to pass this test you must present relevant paperwork and evidence, which is not a simple matter. The second test is the days test that states that a person will be considered a resident of Israel if he resided in Israel 183 days of the specific tax year, or alternatively, 30 days or more, when the total period of stay in Israel in the tax year and two previous years is 425 days or more. This test can be contradicted, in which the taxpayer can claim that despite the applicability of the test, he is not a resident of Israel because the center of his life is no longer in Israel.
T. 1348 – Declaration of Residency
Disconnection of residency from the National Security Institute and the Health Insurance Fund
Frequently, Israeli residents living abroad seek recognition as foreign residents with regards to income tax, but do not sever the status of residency at the National Security Institute and therefore continues to be a member of the Health care system. This is so that said residents can receive services from these bodies if required. The Tax Authority can see this as a significant connection to Israel and reject the taxpayer’s claim that he is a foreign resident, for all that this implies. This is another aspect that reiterates the importance of legal support. If you are in need of these services even though you live abroad (for example, because he moved to a country where medical services aren’t as good as in Israel) we can examine whether it is possible to continue the relationship with one or both of these bodies and still be recognized as a foreign resident by the tax authority.
Support From a Lawyer is Essential
The issue of severance of residency has far-reaching implications for the liability to pay tax in the State of Israel, including the right to receive services from the National Security Institute.
You have decided to relocate or you have found yourself in a situation where your stay abroad is longer than planned, we recommend that you contact us and consult with us in order to examine the consequences of the matter, for matters related to tax payment we are accompanied by accountants who specialize in international taxation.
In conclusion:
Regulating matters related to severing residency, or relinquishing Israeli citizenship is a legal procedure accompanied by bureaucracy with far-reaching effects on matters of taxation, exercise of medical rights, etc.
At Mor & Co.’s personal status department, we understand the challenges you face.
We are here to protect and defend your rights.
We guarantee you the best legal support and personal representation at all stages of the legal process because we possess extensive legal knowledge and proven experience in the field.
Our office’s personal status department provides legal assistance to clients seeking to terminate Israeli residency.
The staff in lawyers will be able to assist you in any matter related to regulating your Israeli status.
Do not hesitate! Call now at 02-595-3322 or send a WhatsApp message to 050-441-1343
