Ending residency for income tax and National Insurance: the tests, the presumptions and what to file
People moving abroad sometimes assume that tax stays behind with the apartment. The Income Tax Ordinance assumes the opposite: an Israeli resident remains a resident, and is taxed on income from anywhere, until their centre of life has actually moved and that move is proved. This page goes through the test, the day-count presumptions, exit tax and reporting, and the difference between the Tax Authority's decision and the National Insurance Institute's.
"The same facts have to tell one story to the Tax Authority, the National Insurance Institute and the health fund. A file in which the stories differ fails on the contradiction, not on the law."
Adv. and Notary Igal Mor
The starting point: a resident stays a resident until proved otherwise
Since the tax reform of the early 2000s, Israel's tax system has been personal: an Israeli resident is taxed on income whether produced in Israel or outside it. The question "am I a resident" is therefore the first question for anyone moving abroad, not one to be asked in hindsight.
The Tax Authority's starting point is continuity. A person who was an Israeli resident remains one, even while staying abroad for a long period, until they show that their centre of life has moved. The burden lies on the individual, and the evidence is gathered from everyday life: housing, family, work, assets, community.
Whoever discovers this rule on returning to Israel, after years without filing or paying, also discovers a debt. Whoever deals with it before departure, or close to it, sets the date and the evidentiary picture themselves.
Income Tax Ordinance [New Version], sections 1 and 2; Income Tax Ordinance (Amendment No. 132) Law, 5762-2002. Checked September 2026.
The centre-of-life test: five considerations
Section 1 of the Ordinance defines an individual Israeli resident as a person whose centre of life is in Israel, and directs that the whole of their family, economic and social ties be weighed for that purpose. The section lists five considerations: the place of the permanent home; the place of residence of the individual and their family; the place of their regular or permanent occupation or permanent employment; the place of their active and material economic interests; and the place of their activity in organisations, associations and institutions.
The list is open. No single consideration is decisive, and there is no formula. A court and an assessing officer examine the whole picture, which is why two people who left on the same day for the same country may reach different results: one left behind an apartment, a spouse and membership of an association; the other moved everything.
The case law has recognised that spouses can have different centres of life at the same time, where one has moved abroad and the other stayed. That is not necessarily a weakness, but it does call for an orderly explanation.
Income Tax Ordinance, section 1, definition of "Israeli resident", paragraph (a)(1). Checked September 2026.
The day-count presumptions, and why they are rebuttable
Alongside the centre-of-life test, section 1 sets two presumptions that rest on counting days. The first: an individual is presumed to have their centre of life in Israel if they spent more than half the days of the tax year in Israel. The second: the same presumption applies where they spent a shorter period in Israel in the tax year, provided that their total presence in that year and the two preceding years reaches a cumulative threshold set by the law.
What matters about the presumptions is not the number but their nature: the Ordinance states expressly that the presumption may be rebutted, both by the individual and by the assessing officer. A person who meets the day count can show that their centre of life is nonetheless abroad, and the assessing officer can argue residency even where the day count falls short of the threshold.
Counting days is therefore not tax planning. It is the opening point of the evidentiary question, and whoever relies on it alone finds that out in the assessment.
As of September 2026, the first presumption is presence of 183 days or more in the tax year; the second is presence of 30 days or more in the tax year where total presence in the tax year and the two preceding years is 425 days or more.
Income Tax Ordinance, section 1, definition of "Israeli resident", paragraphs (a)(2) and (a)(3). Checked September 2026.
When a person becomes a "foreign resident" under the Ordinance
The Ordinance also defines the other side. A "foreign resident" is a person who is not an Israeli resident, and also an individual who meets two cumulative conditions: they spent most of the days of each of two consecutive tax years outside Israel, and their centre of life was not in Israel in the two tax years that followed.
This definition, added by Amendment 168 to the Ordinance, spreads a picture over four years: two years of physical absence and two years of a centre of life abroad. A person who meets it gains certainty, even if in a particular year some tie to Israel remained.
In practice, many do not wait four years to know their status. Income Tax Circular 1/2012 deals with fixing the date of severance, and that is the date from which the tax questions, exit tax and reporting follow.
As of September 2026, the first condition is presence outside Israel of at least 183 days in each of the two tax years.
Income Tax Ordinance, section 1, definition of "foreign resident"; Income Tax Circular 1/2012. Checked September 2026.
National Insurance: the same question, a separate decision
The Tax Authority and the National Insurance Institute ask the same question, where the centre of life is, and answer it separately. The National Insurance Law has no positive definition of "Israeli resident", and the Institute applies a centre-of-life test shaped by the labour courts, on a questionnaire of its own. A person can be a foreign resident for tax and an Israeli resident for National Insurance, and the reverse.
The link between the two is not formal but evidentiary. The Institute's residency questionnaire asks whether the insured person paid income tax in Israel, and the Tax Authority treats continued National Insurance and health fund membership as a tie to Israel. Each body reads the other's decision as evidence, not as a conclusion.
A person seeking to end residency therefore needs to decide on both tracks together, in advance, rather than discover that the evidence filed with one body contradicts the claim made to the other. The detail on National Insurance and the health fund: ending residency and health insurance on relocation.
National Insurance Law [Consolidated Version], 5755-1995, section 2A; form BL/627; National Insurance Institute website, "Ending residency". Checked September 2026.
Exit tax: the deemed sale on the day before
Section 100A of the Ordinance provides that an asset of an Israeli resident who ceased to be an Israeli resident is deemed sold on the day before the day on which they ceased to be a resident. That is exit tax: the capital gain accrued up to the date of severance is taxed in Israel, even if the asset was not sold.
The Ordinance allows payment to be deferred. A person who does not pay at the time of departure is treated as having asked to defer the tax until the actual sale, and then the part of the gain attributed to the period of Israeli residency is computed on a linear basis, by the ratio of the holding period up to the day of departure to the whole holding period. The remainder is attributed to the period after severance.
The practical meaning: the date of severance is not only a matter of which tax year. It determines which assets enter the deemed sale, at what value, and what will be required in reporting. A person holding shares, options or real estate abroad needs to examine the section before the date is fixed, not after.
Income Tax Ordinance, section 100A; report of the Committee on International Tax Reform (Tax Authority, 2021). Checked September 2026.
Reporting: Form 1348, the circular and the treaties
A person who claims not to be an Israeli resident, but who meets a day-count presumption, must attach Form 1348, the residency declaration, to the annual return, under section 131(a)(5e) of the Ordinance. The form is an annex to the individual return (Form 1301), and it asks about days of presence in the tax year and the two preceding years, tax residency in another country, home, spouse and children, work, health fund, bank accounts and National Insurance payments. The supporting documents are attached to it.
Income Tax Circular 1/2012 regulates the fixing of the date of severance and the date on which a foreign resident becomes an Israeli resident. It is the document assessing officers work by, and the claim in the form is best built in its language.
Where the destination country has a double taxation treaty with Israel, the treaty decides a case of dual residency by tie-breakers in a fixed order: permanent home; centre of vital interests; habitual abode; nationality; and finally mutual agreement between the authorities. A treaty does not displace the Ordinance's test, but it can decide where two countries claim the same taxpayer.
Income Tax Ordinance, section 131(a)(5e); Form 1348 for tax year 2025; Income Tax Circular 1/2012; double taxation treaty, article 4 (official text, gov.il). Checked September 2026.
What is about to change, and what already has
In recent years the Tax Authority has sought to replace the rebuttable presumptions with irrebuttable ones. A draft bill published in July 2025 proposes to determine residency or foreign residency by a weighted day count over several tax years, so that in clear-cut cases the centre-of-life examination would no longer be required, and to abolish the Form 1348 duty in those cases. Anyone planning a departure should know the outline, since its enactment would change the rules for the years that follow.
What has already changed concerns those who return. The Ordinance grants reliefs to a "returning resident" and a "veteran returning resident" according to the number of years abroad, and Amendment 272 to the Ordinance abolished, for those who became veteran returning residents or new immigrants from the start of 2026, the exemption from reporting foreign income. The tax exemption remains; the reporting duty was added. A person planning severance today is implicitly planning the return too, and the rules there are no longer those of earlier years.
As of September 2026, the draft Income Tax Ordinance Amendment Bill (Place of Residence of an Individual), 5785-2025 of 2 July 2025 has not been enacted, and the rebuttable presumptions in section 1 of the Ordinance are the law in force. Amendment 272 applies to those who became veteran returning residents or new immigrants from 1 January 2026.
Draft Income Tax Ordinance Amendment Bill (Place of Residence of an Individual), 5785-2025; Income Tax Ordinance (Amendment No. 272) Law, 5784-2024; Income Tax Ordinance, section 14. Checked September 2026.
In summary
In summary, tax residency is determined by the centre of life, on its five considerations, and the day-count presumptions are only a rebuttable starting point. The definition of "foreign resident" spans four years, exit tax is triggered on the day before severance, reporting is made on Form 1348, and the National Insurance Institute decides the same question separately.
The difficulty is not in understanding the test but in proving it: the same facts, housing, family, work, assets, must tell one story to the Tax Authority, to the National Insurance Institute, to the health fund and at times to the other country as well. That coordination is not done in hindsight.
Contact us to review the date of severance, exit tax and reporting, and to coordinate the move with the National Insurance Institute, together with accountants specialising in international taxation where required.
What people ask us about ending tax residency
I moved abroad two years ago and did not file. Am I still an Israeli resident?
If I spent fewer days in Israel than the presumption threshold, am I automatically a foreign resident?
What is the difference between a "foreign resident" under the Ordinance and severance of residency?
What is exit tax?
Do I have to file Form 1348?
Does severance for income tax also sever National Insurance residency?
I heard the law is about to change. Should I wait?
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Foreign Residents DepartmentEstate of a foreign resident with assets in IsraelEnding residency for income tax and National InsuranceEnding residency and health insurance on relocationReal estate and tax
Appreciation tax exemption for a foreign residentTax on an inherited apartmentReal estate transaction taxesFix the date of severance before the Tax Authority fixes it for you
A short consultation meeting in which we map the five considerations in your situation, examine which assets enter exit tax, and coordinate the move with the National Insurance Institute.