Tax and Personal Status Attorneys
Severing Israeli Residency for Income Tax and National Insurance Purposes
Many Israelis relocate abroad for extended periods and, upon returning, discover that they have accumulated significant income tax and National Insurance debts for the entire duration of their absence. To avoid this situation, it is essential to formally sever your Israeli tax residency before or during your time abroad. Proper planning and legal guidance can prevent unnecessary financial obligations and protect your rights.
By Igal Mor, Adv. & Notary
Accuracy in Legal Advice. Excellence in legal support.
Understanding Income Tax Liability for Israeli Residents
One of the most significant obligations imposed on Israeli residents is the payment of income tax on worldwide income. But what happens when you move abroad for an extended period — whether for work, study, or personal reasons? Without formally severing your tax residency, the Israel Tax Authority may continue to treat you as a resident, subjecting your global income to Israeli taxation throughout the entire period of your absence.
How Is Tax Residency Determined?
An Israeli resident seeking recognition as a foreign resident by the Tax Authority must satisfy two primary tests: the center of life test and the days test. The center of life test examines where the individual’s personal, economic, and social ties are concentrated — including family connections, property ownership, employment, and business activities. The days test considers the number of days the individual spent in Israel during the relevant tax years. Both tests must be evaluated comprehensively to determine residency status.
Severing Residency From the National Insurance Institute and Health Fund
Israeli residents living abroad frequently seek to sever their residency with the National Insurance Institute as well. The implications of this decision are significant: while severing National Insurance residency eliminates the obligation to pay ongoing contributions, it also terminates eligibility for health fund services, disability benefits, and other National Insurance entitlements. The decision must therefore be made with a full understanding of both the financial savings and the rights that will be forfeited.
Why Legal Guidance Is Essential
The decision to sever Israeli residency has far-reaching implications for your tax obligations, National Insurance contributions, and eligibility for government services. Whether you have already relocated or are planning to do so, obtaining professional legal advice is critical to ensuring that the severance is carried out properly and that your rights are fully protected throughout the process.
Matters related to severing residency or relinquishing Israeli citizenship involve complex legal procedures with significant consequences for taxation, medical rights, and social benefits. The Tax and Personal Status Department at Mor & Co. Law Firm provides expert guidance and representation at every stage of the residency severance process, ensuring that our clients make fully informed decisions and comply with all applicable legal requirements.