Do you meet the criteria?
The world of relocation consists of many decisions, decisions that ultimately affect all areas of life – real estate, medical aspects, income and expenses, educational frameworks for children and more.
When it comes to relocation and income tax, cutting off residency is one of those significant decisions.
Contents
Disconnecting income tax residency
Before we dive deeper into this complex issue to understand how to cut off residency, it is important to note that if you decide to cut off residency, you will still be considered citizens of Israel. While you will not be required to pay national insurance contributions, income tax and other taxes and you will not even be required to declare your income – accordingly, you will not receive medical services, Social Security benefits and benefits to which the residents of the state are entitled.
When you decide to return to being a resident of Israel, you will receive certain conditions, relief and benefits of returning residents.
Criteria for disconnecting residency for tax purposes
Where is the center of your life?
A foreign resident is one whose center of life is not in Israel according to one of the following three sections:
- Objective plane: Examines where most of your economic, family, and social ties are. The state examines criteria such as the place of residence of the nuclear family, the workplace, the place of economic interests and the place of activity in various organizations. For example, if you own a house in Israel, you must rent it out for a period of at least two years so that it does not be considered your permanent home in Israel.
- Quantitative strengths: There is a quantitative strength of 183 days a year, meaning that if you were 183 days a year outside of Israel, the center of your life is not in Israel. Another presumption exists as a rule if you have been in Israel for 425 days over three years. Quantitative holdings are contradictory and there are ways to prove that the center of your life was actually abroad at the time – so it is important to consult a tax expert. Another technical clause states that a foreign resident has been abroad for four consecutive years, with at least 183 days outside of Israel for the first two years.
- Subjective plane: A statement of your intentions, when they have references that are supported by external evidence and are consistent with the essential signs.
Once you prove to the authorities that you are a nonresident, you can cut off residency.
Is cutting off residency the right decision for you?
After you know for sure that you meet the criteria for disconnecting the residency, decide whether the step will even benefit you. If you are traveling for a short period of up to a year, you may be better off submitting tax reports in Israel and continuing to transfer national insurance payments by standing order, in order to preserve your rights in Israel.
If you decide that this is the right step for you, you must go to the National Insurance website and download the
questionnaire to determine residency
. This questionnaire is intended to determine whether the center of your life is indeed not in Israel. Fill it carefully and carefully and add documents to back up what you’re writing.
Another, easier way is to use Ocean’s experts to do it for you.
Of course, if you decide to adopt the alternative of disconnecting residency, you are required to examine all the properties you own in Israel and consider selling them and/or renting them. For pension assets (executive insurance/ pension funds/ training fund), it is recommended to consult a pension agent and, if possible, withdraw them (if they are liquid assets).
Disadvantages of detaching residency
Cutting off residency for tax purposes infringes on rights such as tax benefits related to the purchase and sale of a residential apartment in Israel. In addition, those who cease to be a resident of Israel and wish to return will be forced to receive health services in Israel only after a waiting period or redeem the period for payment of a considerable amount. The maximum waiting period is six months.
Have you decided not to cut off residency?
If you decide not to disconnect residency, you are required to submit tax reports in Israel, that is, you will need to manage a double accounting system and accordingly, this will have implications for your net income, insurance policies and even the real estate you own.
Disconnecting Social Security residency
Filing the tax returns may also affect the liability of national insurance contributions. However, regarding Social Security, pre-arrange a standing order for the National Insurance Institute, otherwise any delay in payment will result in heavy fines and unnecessary sanctions.
So it says inNational Insurance Website: “A resident of Israel who has been abroad for two consecutive years or more, and does not pay health insurance contributions to the National Insurance Institute in Israel, and is lagging in paying the insurance premiums for a period of at least 12 months, will be deprived of the right to receive medical services in Israel under the National Health Insurance Law for a maximum period of up to 6 months at most.”
Read more
about social security benefits
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The aforesaid does not constitute legal and/or professional advice and in any case it is advisable to schedule a consultation on the issues mentioned in this article.
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