Israel’s Supreme Court clarifies tax exemption for new immigrants and returning residents
In a new ruling, Israel’s Supreme Court has approved the longstanding position of the Israeli Tax Authorities, in that business income generated in Israel by a new immigrant or senior returning-resident is subject to Israeli taxation during the 10-year tax holiday.
We caught up with Tadmor Levy’s Head of Tax, Boaz Feinberg, who told us:
“The law hasn’t changed dramatically. The Supreme Court has confirmed a longstanding position of the ITA, that was not really disputed by many taxpayers and practitioners. The specific taxpayer tried to claim that if his business activity in Israel is linked to an asset outside Israel, the law allows for an interpretation that said income would be exempt for Olim and Senior Returning Residents for the period of the 10 year tax holiday.
The court hasn’t entered into a much more crucial question (in my opinion) regarding the manner in which mixed income should be taxed (i.e business income that was generated by the taxpayer both in Israel and abroad during the tax year).
There was an obiter remark made by Judge Meltzer, that there may be certain cases in which he would consider a tax exempt on active income generated in Israel, if it is linked to a specific asset abroad, mostly connected with IP. The judge hasn’t provided additional explanations since it wasn’t part of the specific issue.”
Boaz also talked to Globes in detail, explaining why the ITA’s stance is not as straightforward as it seems (Hebrew).
