Israel can be a very welcoming country when it comes to wine, weather and watermelons. But tax is also a factor. Below is a summary of the tax implications regarding Israeli residency and of becoming a new resident. Who is a resident? Starting January 1, 2003, Amendment 132 (main tax reform) clarified the definition of residency for tax purposes, subject to any applicable tax treaty: Individuals will be resident if their center of living is in Israel, having regard to their overall personal, family economic and social circumstances. Individuals will generally be presumed resident if they are present in Israel 183 days or more in a tax year, or 30 days in a tax year and 425 days in Israel in a particular year plus the previous two years. A day includes a part of a day. These presumptions may be challenged by the taxpayer or the tax authorities. Aside from the number of days' presence in Israel, the center of living criteria listed in the law are: Location of permanent home; place of residence of the individual and his/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 official bodies. No concept of domicile exists for Israeli tax purposes. Also, citizenship is not listed in the center of living criteria mentioned above. A person's tax status is normally unconnected to their immigration status . According to accepted practice and the recent Arie Gonen case in the Israeli Supreme Court, an individual becomes resident in Israel upon his date of arrival in Israel - in that case in October of the tax year concerned. But this does not happen overnight - it happens at the end of a gradual process of setting up residence in Israel. In other recent cases of Moshe Zeiger and Solar Giora, the District Court ruled that a husband can reside miles away from his wife even though they are happily married - due to the husband's business or other factors such as the need to care for unwell relatives. If you are resident in Israel and another country under their respective tax laws, help is at hand if the other country has a tax treaty with Israel. This is thanks to "tie-breaker" clauses in the treaty. These refer to factors such as the permanent home or center of vital interests to determine in which single country you are resident. Once you become an Israeli resident, the following Israeli tax implications may be relevant. Firstly, you may be subject to Israeli tax on your income worldwide at rates of up to 49%. However, you may benefit from various tax benefits granted to new residents and returning residents for a limited period - we will discuss that in a separate article. After that, any of your income or gains from investments made after becoming resident will generally be subject to tax at the various Israeli rates. Of course, you may be liable to certain tax reporting requirements in Israel - more on that also in a separate article. Last, but definitely not least, if you later stop residing in Israel, you may have to pay "exit tax" on your assets. This is really a capital gains tax at rates ranging from 20% to 49% on your assets, due one day before departure or upon a subsequent actual sale of the assets concerned. Bad enough, but even worse if your new country won't allow a credit for such tax as you didn't really sell any assets. For example, you move from Israel to take up residence in California and your main asset is stock options - the stock options will be exposed to Israeli "exit tax," notwithstanding any foreign tax in your new country. A possible solution may be to return to live in Israel before you sell the assets concerned - but check this with your advisors. email@example.com The writer is an International Tax Partner at Ernst & Young Israel.