Israel: the new tax haven

For the majority of hard-working Israelis, the tax system in Israel is always ripe for an insult or three. And to hear that Israel is handing out a multitude of tax breaks to some tycoons and entrepreneurs is hardly going to endear the Israeli public to the tax system…

But if you’re a new immigrant with some cash in your pockets or a high-tech entrepreneur, or a tycoon loaded with cash (which, let’s face it, all money-hungry governments would love more of), you’re probably smiling a little more than most.

Because the Israeli government is offering some fairly decent tax breaks for new immigrants (Oleh Hadishim in Hebrew) and returning residents (those who left the country – some of whom are, of course, rich high-tech entrepreneurs/tycoons who fled the Israeli taxman’s once mighty death-grip).

These extra special tax breaks were originally set in September of last year and specifically target people the Israeli government wants flooding its coffers…the tax breaks include a ten-year hiatus from paying income taxes and the filing of returns on income from foreign assets, which applies to all sources of foreign income, including dividends, rental income, and business revenue.

Those returning citizens who have been abroad for over ten years get the ten year exemption from income tax, while those who have been abroad for over six years get a five year exemption. One last chance to make a big tax saving is up at the end of 2009 – those Israelis who have been living abroad for five years will be allowed a ten year exemption. Come January, that window is gone and it’s back to the five year exemption – so any Israelis out there thinking of returning, this could be your chance!

The new tax breaks go even further if you make a substantial investment in Israel within two years of being in Israel. Quite what “substantial” is will probably be agreed upon through countless accountant and tax expert conference calls, but if agreed, it means income tax exemption for ten years and filing for an additional ten years (20 years altogether).

Of course, the government is hopeful that the tax exemptions will encourage the new immigrants and returning residents to invest in Israel and stay beyond the tax break period, but there’s absolutely nothing stopping them from upping and leaving. The long term aim is for the Israeli economy to benefit, but if you’ve got the cash and you’re thinking of making aliyah, this could be the clincher.

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