Israel's parliament approves new reporting obligations for new residents and trustees

Thursday, 11 April 2024
Israel's parliament has approved an amendment to the Income Tax Ordinance, introducing new reporting obligations for new and returning residents and for trusts.

The most significant development is that trustees of a taxpaying Israeli trust will have to make annual reports on its 'controlling individuals'. Such individuals are the settlor, trustees, protector and beneficiaries, including the controlling individuals of any beneficiary corporations. This obligation comes into effect from the 2025 tax year. The information must be submitted along with the annual tax return.

Moreover, from 1 January 2026, all Israel-resident trustees will be required to report the trust's controlling individuals and their place of residence to the Israeli tax authority. This will apply even if the trust itself is not subject to reporting and taxation in Israel, for example, if none of the settlors or beneficiaries are residents of Israel. The reports will have to be submitted within 90 days from the date of creation of the trust or within 120 days from 1 January 2026, where the trust was created before the amendment was published. It also applies to any person who holds property registered under their name for the benefit of another person.

The ten-year reporting exemption currently granted to new Israeli tax residents and veteran returning tax residents on their foreign assets and income is being abolished for individuals who become Israeli resident as of 1 January 2026. This is different from the original version of the Bill introduced in February 2024, which set the threshold date at June 2025. These individuals will still be entitled to a tax exemption on income earned outside of Israel during the grace period but will have to report it.

Another amendment concerns controlled foreign companies (CFCs). Currently, a foreign company is not considered a resident of Israel during the exempt period if its control and management is effectively carried out by an individual who is a new or veteran returning tax resident. This will be amended so that the tax authority will be entitled to require the CFC to submit information or to file a tax return in Israel.


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