The song “Happy” by Pharrell Williams is a universal success, although the version “Happy in Tehran” ended in arrest last week for all involved.In Israel, the Supreme Court just chimed in by upholding yet again that a couple can be happily married but fiscally resident in different countries (Kfar Saba Assessing Officer vs Michael Sapir, Civil Appeal 4862/13, handed down May 25).The Supreme Court already ruled that happily married spouses can live apart, but the Israel Tax Authority (ITA ) has always begged to differ.Who is an Israeli resident? Since 2003, an individual has been defined by the Income Tax Ordinance (ITO ) to be an Israeli tax resident if his or her center of living is in Israel, taking into account the individual’s family, economic and social links.Residence is presumed, unless challenged by the taxpayer or by the ITA , in either of the following circumstances: (1) the individual is present in Israel for at least 183 days in a tax year ending December 31; or (2) the individual is present in Israel for at least 30 days in the current tax year and 425 cumulative days in the current and two preceding tax years.Additional criteria listed in the ITO that indicate residence are: location of a permanent home; place of residence of the individual and his or her family; place where the individual regularly works or is employed; location of active and material economic interests; place where the individual is active in various organizations, associations or institutions; employment by certain official bodies.The facts of the latest case In the Sapir case, the taxpayer was sent to work in Singapore in the years 1994-1998 for an Israeli group. On June 1, 2001, he returned to live and work in Singapore as an engineer for another party, without his wife, who continued living and working in Israel. His children were already adults.The taxpayer was present in Israel as follows: 224 days in 2001, 148 days in 2002, 166 days in 2003, “at least” 145 days in 2004 and 185 days in 2005.The individual had some links to Israel. His wife continued living in an apartment in Israel that the couple owned. A second apartment they jointly owned was rented out. His pension for past service in the IDF was paid into a joint bank account of the couple.The individual also had strong links to Singapore. He claimed he fell in love with Singapore almost from the first glance. He rented an apartment in central Singapore for more than 10 years.He was a permanent resident of Singapore entitled to carry out any work there he chose, or none at all. He started his own business in Singapore through a Singapore company. He had a private bank account with checking, forex and credit-card facilities. His company had similar bank facilities.He paid money into the mandatory Singapore retirement-fund system. He took out medical and other insurance in Singapore.He built up a circle of friends and contacts there. He played tennis and golf there several times a week at sports clubs and participated in tournaments.He played bridge and regularly went to a pub to drink beer and watch sports, especially English soccer. Once he reached age 60, Singapore allowed him transportation perks.The individual was also active in the Singapore Jewish community and central Synagogue, had Friday evening meals with other congregants there, helped with festival activities and special activities for children, was elected to the managing board of the synagogue and was chairman of its computer committee.For Singapore tax purposes, the individual was classified as a Singapore resident from the date he arrived to live there (June 1, 2001) and duly reported and paid Singapore taxes from that time onward.When asked why Singapore, the individual replied that he is happy to be there, the place encourages enterprise and is a business paradise.He did not regard himself as resident anywhere else socially.When asked about his wife not joining him to live in Singapore, he explained that they decided, after long conversations, to live in a way that would let each one realize their own ambitions and abilities and have their own center of living.What was the issue? The issue in the case was whether the individual was fiscally resident in Israel in the years 2001-2005, as claimed by the ITA , given that his wife lived in Israel in those years. The ITA claimed that the individual’s absences from Israel were all temporary and not permanent and ongoing.The Supreme Court’s decision The Supreme Court upheld an earlier judgment of the District Court. With regard to 2001-2002, the court followed the decision in the Arye Gonen case in the Supreme Court as allowing the “center of living” test of residence to be applied as accepted practice in Israel even before it was enacted in 2003.Therefore, the court ruled that the individual was resident in Israel in 2001 because he was present in Israel 224 days. As for the years 2002-2005, the court ruled that although he was present in Israel more than 425 days over every period of three years, he managed to rebut the presumption in the law that he was resident in Israel.Based on the facts presented, he was a Singapore resident because most of his ties were to Singapore and therefore his center of living was in Singapore. The court noted that his property and other rights were derived on the past when he was an Israeli resident.Moreover, although the center of living and permanent home of a person is usually where his family live, experience shows there are families who choose to live differently. It is not uncommon for parents to live in one country and children in another country after they grow up. In this case, the parents also decided to maintain separate lifestyles.Therefore, the court ruled that the individual had proved his center of living was in Singapore, and he was a Singapore resident for tax purposes in 2002-2005.Comments A number of comments come to mind.First, the case shows that a couple can be fiscally resident in different countries if they have different centers of living.Second, the courts upheld the precedent in the earlier Supreme Court case of Arye Gonen, which the ITA had tried to ignore for a number of years.Third, the case shows it is not enough to be a nonresident of Israel; it is necessary to prove another country of residence – in this case Singapore.Therefore, Israelis who become globetrotters with no fixed abode anywhere are likely to remain fiscally resident in Israel. The same applies to business people who work abroad Sundays to Thursdays but flock back to their spouse and kids every weekend and festival.Finally, if you do succeed in moving your fiscal residence away from Israel, beware of the Israeli exit tax; this is really capital-gains tax at rates of 25 percent to around 50% on your assets as if you sold them one day before your departure.As always, consult experienced tax advisers in each country at an early stage in specific firstname.lastname@example.org Leon Harris is a certified public accountant and tax specialist at Harris Consulting & Tax Ltd.