As you may be aware, there have been significant changes made to Israeli tax law. These changes will affect any foreign trust if one or more of the beneficiaries resides in Israel.
It has come to our attention that many Australian citizens with relatives in Israel may be affected by these changes, particularly those with testamentary trusts in their Wills.
Below you will find a comprehensive summary of the key issues as well as how to ensure you are compliant with the new tax regime.
Israeli beneficiary trust
An Israeli beneficiary trust is any foreign trust with even one Israeli resident beneficiary. The trust will be subject to tax in Israel even if the assets and/or trustees are in Australia.
There are 2 types of Israeli beneficiary trusts:
1. Relatives (Family) trust – which is taxed concessionally
2. Non relatives trust – which is taxed as an Israeli resident at marginal rates
Is defined broadly to encompass any person that is entitled to benefit either directly or indirectly from the assets of the trust or its income.
The definition of Israeli resident is extremely broad and may even extend to Australian citizens studying, holidaying or engaging in army training in Israel.
Trustees of all Israeli beneficiary trusts must notify the Israeli tax assessor of the existence of the trust by 30 June 2014.
In addition, by 30 June 2014, trustees of a relatives trust must nominated between the two possible taxation regimes:
(1) Deferred Tax Regime – Israeli beneficiary is taxed at a rate of 30% upon distributions when receive while there is no annual tax at the trust level
(2) Alternative Regime – imposes a 25% tax at the trust level on a yearly basis with
respect to the portion of income allocated to Israeli beneficiaries
Warlows Legal has a dedicated team to assist you in complying with the new Israeli tax law obligations. We can work closely with your accountant to assist you in:
• Revising your Will
• Avoiding double taxation
• Amending trust deeds
• General advice and guidance Please don’t hesitate to get in touch.