Thinking about making a move and changing your tax residency status from Israel to another country? This guide will walk you through the essential steps you need to take to cease your tax residency in Israel.
Determine Your Residency Status
Before you can cease your tax residency, you need to confirm whether you are currently considered a tax resident in Israel. According to Israeli tax law, you are generally considered a resident if your 'center of life' is in Israel. This involves evaluating various factors such as your family ties, economic interests, and social ties in Israel.
Establish a New Residency
To cease being a tax resident in Israel, you must establish residency in another country. This usually involves spending a significant amount of time in the new country, obtaining a residence permit, and proving that your 'center of life' has shifted to this new location.
Fulfill Reporting Requirements
File an official declaration with the Israel Tax Authority (ITA) stating your intent to cease being a tax resident. You will need to provide substantial evidence that you have established a new residency outside of Israel. This includes documentation such as foreign residency permits, proof of employment, and utility bills from your new residence.
Settle Outstanding Taxes
Ensure that all your tax obligations in Israel are settled before you officially cease your residency. This includes filing any outstanding tax returns and paying any due taxes. The ITA may require you to pay an exit tax on your worldwide assets.
Notify Relevant Authorities
Inform other relevant Israeli authorities, such as the Ministry of Interior, about your change in residency status. This can help ensure that your records are updated and prevent any complications in the future.
Close Financial Accounts
Close or update your Israeli bank accounts, credit cards, and other financial accounts to reflect your new residency status. This step is crucial to avoid any misunderstandings or complications related to tax reporting and financial transactions.
Legal References
- Income Tax Ordinance [New Version], 1961
- Income Tax Regulations (Determining Residency), 2006
- Circular 1/2011 of the Israel Tax Authority
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