By: Eli Doron, Adv; Yaron Tikotzky, Adv, (C.P.A); Dr.Slomo Nass, Adv, (C.P.A)
One of the goals engraved on the flag of the Israeli government, as part of the celebrations of 60 years of existence of our little country, is to encourage the return to the country of new immigrants and returning residents. As we know, the tax system is a prime tool to achieve social and economic objectives, consequently, it was decided to attempt realizing this goal by granting tax benefits.
In the Law for Amendment of the Income Tax Ordinance (Temporary Order No. 168) - 2008 (hereinafter: "the Amendment"), has been determined a new taxation category, the "veteran returning resident". According to instructions in the amendment, a veteran returning resident is an individual becoming anew a resident of Israel after having been a foreign resident for at least ten consecutive years.
The meaning of the above for individuals who may be included in the definition of "veteran returning resident" is far reaching in view of the wide benefits basket provided by the legislator upon his arrival in the country. So, for example, a veteran returning resident is entitled to absolute exemption on all his income originating outside of Israel for 10 years from the date of his return, regardless of the date of acquisition of the property, as well as exemption on capital gain derived from the realization of the property outside of Israel, for a period of 10 years from the date of return, etc.
Many are of the opinion that in the light of the fact that, within the framework of the amendment, relieves were granted to veteran returning residents in the framework of reporting to the tax authorities, is not necessary to reach a "taxation decision" (Pre- Ruling) in this matter, consequently, they forget their taxation concerns in the matter. Will state and emphasize that in our opinion, one must well ascertain that indeed the individual answers to all requirements of the ordinance and of the new amendment, this at least, through obtainment of a legal opinion in the matter.
Finally, we'll mention that the Amendment, enforced on individuals retroactively since 1.1.07, determines transit provisions and many changes for the taxation years 2007, 2008 and 2009, one of the principle ones being the instruction fixed in clause 15 (b) of the amendment, by which an individual who was an Israeli resident in the course of the tax years 2007, 2008 and 2009 shall be deemed to be a veteran returning resident, as well as an individual who became a resident of Israel after having been a foreign resident for a period of five consecutive years, therefore, he will be entitled to tax exemption for ten years as of the date he had become a resident of Israel, on his income sourced in earnings from outside Israel, so it appears that the window of opportunities on taking advantage of the tax benefits is being reduced.