ISRAEL Law and Practice Contributed by: Yaron Mehulal, Nataly Davidai and Shalom Hershkovitz, FISCHER (FBC & Co.)
new immigrant relief (see 1.3 Income Tax Planning ) and broadening the number of individuals subject to Israeli taxation, by amending the definition of Israeli tax resident to include any person living in Israel for at least 100 days in a certain tax year, and a total of at least 183 days over the two preceding years. In addition, it is also looking to further enforce the cur - rent applicable exit tax along with forcing dividend distributions by private holding companies. Further, the Israeli Finance Ministry is looking into increasing capital gains tax, corporate taxation and the local rate of VAT (in addition to the amendments in corporate taxation which have already been implemented; see 1.1 Tax Regime ). However, alongside the increase in taxation, an anonymous voluntary disclosure proce - dure is expected to be offered to the public. It remains to be seen whether any of the measures being con - sidered will pass the political hurdles and be enacted into law. 1.6 Transparency and Increased Global Reporting Israel implemented the OECD’s Common Reporting Standard (CRS) and the Foreign Account Tax Com - pliance Act (FATCA) regimes in February 2019 and August 2016, respectively. As a result, Israel automati - cally exchanges information on an annual basis with the USA, Australia, the UK, Switzerland, Canada and over 90 additional countries. In fact, in 2021, the Swiss Federal Tax Administra - tion informed 120 Israelis and 150 entities connected to said Israelis that, as per the Israel Tax Authority’s request, it shall exchange information about Swiss bank accounts beneficially owned by said Israelis. Hence, Israeli tax residents who have held or still hold bank accounts or other financial accounts and assets in foreign countries, as well as foreign tax residents who have held or still hold bank accounts or other financial accounts and assets in Israel, are exposed to the exchange of information between Israel and their home countries, and are strongly advised to set - tle any potential tax issues with both the Israeli and the foreign tax authorities, although the anonymous voluntary discovery procedure offered by the Israel Tax Authority expired on 1 January 2020. It should be noted that a new anonymous voluntary disclosure
procedure is expected to be published in the next few months. Currently there is no public beneficial ownership reg - ister. However, the Israeli Companies Registrar man - ages the Companies Register and the Partnerships Register, in which the direct shareholders or partners, as applicable, are noted. In addition, trusts and foun - dations shall be required to start reporting their ben - eficial owners and controlling persons to the Israel Tax Authority as of the 2025 tax return (to be submitted in 2026). 2. Succession 2.1 Cultural Considerations in Succession Planning Israel is a relatively young country, having existed for only 77 years. Hence, wealthy families in general, and multi-generational wealth transfers in particular, do not play a major role in the country’s economic reality. However, as the country’s founding genera - tion is becoming elderly, the transfer of businesses and wealth to the third and fourth generations is pro - gressively increasing. As a result, multi-generational wealth transfers are expected to play a major role in Israel’s economy in the near future. In general, people of means from the older first and second generations prefer to transfer their wealth to their children by way of a straightforward inheritance. However, in recent years there has been sturdy growth in the older generations’ interest in legal mechanisms such as trusts and the establishment of family con - stitutions to assist in succession planning. However, their mistrust of financial and legal systems, which is the result of years of nomadism and the exclusion of the Jewish people, is still evident. Additionally, as Israel sees a rapid growth in major individual wealth, as a result of large-scale sales of companies and businesses to global corporations, especially in the hi-tech industry, younger self-made wealthy individuals, with young children or in their second marriage, tend to prefer setting up trusts and similar arrangements, such as guardianship, for the regulation of wealth transfers and for the protection
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