How the Law Extorts Foreigners
If you are not an Israeli citizen but you live in Israel 183 days of the year, you have to pay Israeli taxes on your foreign income
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A foreign national living only a short time in Israel is required to report his income from abroad to the tax authority. Foreign citizens who are considering whether to move to Israel are often stunned when confronted by this requirement.
The law is that every foreign national who lives in Israel for 183 days of the tax year is obligated to report and pay tax on revenue generated or accrued abroad, or originating from foreign assets abroad, merely because he has resident status in Israel.
The dry law does not consider the tremendous difficulty this throws in the way of those who are thinking of immigrating to Israel. This population usually has had to put up with strict regulations when living in Israel which they staunchly bore before deciding to become full Israeli citizens.
Comparing the strict regulations and limitations they are subjected to in Israel with the numerous tax benefits and tax relief which they receive in their country of origin is a major source of their frustration and hesitation to commit to Israel.
The chairman of Israeli Shortcut wrote the Minister of Finance a letter in which he pointed out a large variety of tax issues that are devastating to this population and how correcting them would bring great relief. He noted that the State of Israel provides huge funding to various entities that promote aliya to the State and seek to increase it, while changing the tax law as it concerns foreign nationals would probably do far more for aliya than anything else. Once foreign nationals are no longer worried that the Israeli tax authority will take away their financial security, the way to aliya is open.
The chairman also emphasized that the foreign nationals’ economic contribution to the State of Israel is vast, both due to the business and trade they bring with them to Israel, and due to the funding they bring from abroad to invest in Israeli commerce. If the decision makers determining policy for the Israeli tax authorities would take these economic considerations into consideration, they would realized that tax relief for this population is an imperative for both them and the State.
An important side benefit is that it would also bring a tailwind to aliya.