The situation in which a new oleh earns income from overseas but performs the services in Israel will not benefit from these new proposals.
By PHILIP BRAUDEtaxes good 88(photo credit: )
For the past few years, I have been actively dealing with structuring the financial affairs of prospective olim, and have considered that the current Israeli tax legislation accords near-tax haven status to new immigrants, as it accords them various tax exemptions, such as a five-year exemption on investment income, a 10-year exemption on capital gains from overseas assets, a four-year exemption on income from overseas businesses owned for five years before assuming residence, and a 20-year exemption on foreign currency deposits held in Israeli banks.
In a recent press release cosigned by the finance and immigration ministers, a series of tax breaks designed to encourage immigration to Israel was announced. These proposals were meant to be enacted as law by Independence Day, but unfortunately they are still winding their way through the Knesset and are still not law.
Under the old law, to obtain either the five-year investment income tax exemption or the 10-year capital gains tax exemption, the specific assets needed to be held outside of Israel by the new Israeli resident before his arrival in Israel. The intention of the proposed amendment is for the exemption to apply to all the new resident's overseas affairs for the extended 10-year period, without the limitation of the exemption only applying to pre-owned assets.
Unfortunately, the proposals seem to contain many gaps, as it appears that overseas pensions and retirement plans, overseas trusts and National Insurance issues have not been addressed in the proposed new law. In addition, the situation in which a new oleh earns income from overseas but performs the services in Israel will not benefit from these new proposals. I fear that this might encourage many breadwinners to leave their families behind in Israel while they continue their old jobs and businesses in their home country, and could cause social problems.
The proposals are certainly good news for prospective olim, but until the law is passed and there is certainty in the matter, caution is advised when planning one's financial affairs before making aliya.
Philip Braude is an accountant, personal financial planner and licensed investment marketer. He is CEO of Anglo Capital Ltd.pbraude@anglocapital.com
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