Taxation for Olé Hadash
It's a well-known fact that an Olé Hadash does not have to declare all his income to the Israeli tax authorities. This advantage, which is very well known in the French-speaking community, is valid for 10 years from the date of aliyah.
We're talking, of course, about income earned abroad.
This law was passed in 2008, and since then has provided a highly attractive advantage for new immigrants to Israel.
For example, "Olim Hadashim" who arrived in Israel in 2008 were not previously required to declare income earned abroad.
For example, people who still have an income from France (local business, lecture given abroad, etc.) do not need to declare this income in Israel.
For some of us, the 10-year exemption has come to an end.
In fact, this benefit was granted retroactively to immigrants who arrived on or after January 1, 2007.ALSO READ: Tax benefits for an ole hadash
What are the tax obligations now? Do we have to pay retroactively?
A quick reminder. The exemption was granted on all active and passive income generated abroad.
This is also the case for income from capital gains on the sale of foreign assets and investments.
For example, the sale of an apartment, stocks or shares.
Over the years, several attempts have been made to repeal the reporting exemption. Even the current tax authorities have tried to introduce a clause that would reinstate the reporting requirement. These various attempts were inconclusive (D... Thank you), so the benefit is still there for new immigrants and returning residents coming to Israel.
In 2017, we celebrate ten years since the exemption began. So new immigrants and returning residents who arrived ten years earlier will have to start accounting for all their income abroad and topping up taxes in Israel, if necessary.
Most of these people have not registered with the Israeli tax authorities to date, and have therefore only declared their source of income "in Israel".
Those who arrived in 2007 will have to submit their returns for the 2017 tax year. They will also have to submit reports on income received from abroad already during 2017.
Taxpayers are exposed to possible retroactive payments. Both on payments to Bitouah Leoumi and to the Israeli tax authorities.
This delicate subject raises a number of questions that need to be addressed:
- Was all this income tax-free for 10 years?
- The date of entry into force for immigration is not unequivocal: before or after the start of 2007?
You cannot be exempted from the Bitouah Leoumi
The reform was created to encourage immigration and return to Israel by extending the tax benefits that had previously prevailed.
For example, a doctor who left Israel to work in France and opened a private clinic. After 10 years, he decides to come back to Israel. When he goes to work in his clinic in France a few days a week, he could pay no Bitouah Leoumi during his 1st year in Israel and declare nothing to the tax authorities here for 10 years because he is exempt from declaring and paying income tax on the income received from his French clinic.ALSO READ: What is Bitouah Léoumi?
If he earns a salary in an Israeli hospital, he will have to pay tax in Israel on this income because the work is performed in Israel.
Now his wife, two years after immigrating to Israel, has sold her cosmetics business in France. She will therefore be exempt from tax in Israel on this capital gain from the sale of the business. She will, however, have to pay capital gains tax to the French authorities.
Uncertainty exists regarding payments due to Bitouah Leoumi (social security). New immigrants and returning residents have received an exemption from foreign income tax, but an exemption from Bitouah Leoumi on this income has never been enacted. So apparently they were supposed to pay Bituah Leoumi.
On the other hand, the Bitouah Leoumi was not aware of the existence of this income, since it was never declared in Israel.
In a recently published report, the Contrôleur d'Etat pointed out these shortcomings of the tax authorities.
The current concern is that when this doctor has to make these declarations from 2017 to the Israeli tax authorities, will the Bitouah Leoumi retroactively force him to pay the amounts not paid over the last 10 years? The amount could be enormous.
How will the tax authorities deal with the Olé Hadash?
Another concern is for those who came as tourists in 2006. For example, in order to examine the possibility of making Aliyah, and made Aliyah in January 2007. Will they now face penalties because they came in 2006 and not 2007? Will the tax authorities be able to reclaim their taxes for the past 10 years?
Finally, this amendment could also affect French companies which until now have been run by an Ole Hadash. After the exemption expires, companies may be considered as "Israeli companies" for the purposes of examining the company's "management and control" from Israel.
This consideration may lead to exposure to double taxation with another country.
In conclusion: Anyone who made aliyah before 2008 must now comply with the following regulations. israeli tax authorities on pain of heavy penalties and fines.