“May you live in interesting times” is an English expression that is claimed to be a translation of an ancient Chinese curse. We do indeed live in “interesting times”, evidenced every time we open the newspapers and read the headlines. Added to the uncertainties that we all face on a global level, Israeli resident investors face additional challenges on a local security and political level, which is compounded by complex Israeli tax and regulatory requirements.
Clients of Israeli banks face major obstacles in ensuring that they are able to comply with onerous and ever-changing compliance requirements. Today, the banks will request, as a matter of course, supporting documentation evidencing:
- Source of wealth – How was the money made?
- Source of funds – Where was money held along the way?
- Tax compliance – Have these funds been tax reported in accordance with relevant tax laws?
This article aims to explore the effects of compliance and changing taxation on Israeli resident private clients and their financial decisions, and to illustrate the need that these clients have for the assistance of a knowledgeable and licensed advisor in assisting them in structuring and managing their financial affairs.
New residents in Israel enjoy a generous 10-year post-emigration Israeli tax exemption on non-Israeli assets. This however does present certain challenges:
- These assets are often not tax reported in Israel until after the end of the 10-year exemption period, which means that there is no supporting tax documentation to satisfy Israeli banks’ compliance requirements.
- In recent years, the Israeli shekel has been very strong, and Israeli resident clients need exposure to the shekel as that is their currency of expenditure. By investing in Israeli shekel-denominated investments, they lose the benefits of the 10-year post-emigration tax exemption. (To assist our clients in this regard, Braude Wealth has developed international shekel-denominated investment funds, which would allow the investor to enjoy both the exposure to shekel-denominated investments and the 10-year postemigration tax exemption).
- There is very often a need to restructure one’s financial affairs before the end of the 10-year post-emigration exemption period, before one becomes liable to start Israeli tax reporting. This may also present major opportunities in multigenerational multi-jurisdiction wealth structuring in a tax-efficient manner.
Read more in our brand-new publication, The Visionaries