Publications

| Trusts, Estates & Private Wealth Management
July 18th, 2017

The current issue, fifth in number, includes articles by leading academics and lawyers, including an article by Mr. Gur Yehuda Savir, Mr. Aviram Handel and Mr. Ehud Katzenelson from our firm, titled "Have you bequeathed and benefited taxwise?"

 

For further reading (Hebrew):

February 1st, 2017

Third apartment taxation was recently approved as part of the regulation law.  our partners review the latest tax principals . For further reading (Hebrew):   

September 20th, 2016

An Update regarding the draft bill, published by the ITA, on the reportable tax acts, which for the first time, proposes to include a list of acts relating to trusts, by Daniel Paserman (Partner).

In 2006, special regulations were enacted, providing an exhaustive list of tax planning acts that must be reported to the Israel Tax Authority (Reportable Acts). These Reportable Acts include, inter alia, the sale of property to a “relative” that creates a deductible loss for the seller, waiving the debt of a “relative”, acquisition of a company with carryforward losses and others, all in accordance with the conditions prescribed in the regulations. These Reportable Acts, including the parties involved and the amounts that were paid, are to be reported using a special form attached to the annual tax return. Failure to report is a criminal offense. Moreover, in a situation where a Reportable Act creates a tax shortfall in a final assessment exceeding 50% of the tax liability, a deficiency fine of up to 30% of the shortfall may be levied.

 

Recently, a draft bill was published to amend the regulations in respect of acts from 2017 onwards, and for the first time, the Tax Authority proposes to include a list of acts relating to trusts. It seems that the initiative to include acts related to the trusts was born inter alia in the wake of the amendment to the Israeli Income Tax Ordinance, which came into force in 2014. This amendment expands the Israeli tax basis regarding trusts, and eliminates certain exemptions and reliefs. Inter alia, the amendment stipulates that in circumstances where there is an Israeli beneficiary in a trust, the trust will be subject to tax and reporting in Israel, even if the settlor is a foreign resident. Consequently, Following these legislative amendments, many trusts were modified. With this regard, Israeli beneficiaries have been excluded from foreign trusts that were created by foreign residents. In order to trace these changes and deter trustees and beneficiaries from taking such actions, the Tax Authority now also seeks to amend the regulations and apply them to certain acts relating to trusts. Reportable Tax Acts in relation to Trusts.

 

Below is a summary of acts that will be considered Reportable Acts according to the proposed amended regulations:

1. An Israeli resident that was a beneficiary of a trust and was excluded therefrom, received a loan or an asset from someone who was or is still a trustee or beneficiary in the trust, free of charge, and the person transferring the asset or granting the loan was a foreign resident at any time between the exclusion date and the date of the Reportable Act.

2. An Israeli resident beneficiary received a loan from the trust or, alternatively, a trust asset served as collateral for a loan taken by the beneficiary.

3. Abeneficiary provides management or consulting services to the trust or to companies held by the trust; acts in a managerial position of a company or an enterprise held by the trust or is part of the trust’s investment committee or holds another administrative role in the trust.

4. The exclusion of an Israeli resident from being a beneficiary in a trust, whereas, if there was no exclusion, the trust would have been taxable in Israel.

 

The said Reportable Acts will require notification to the Tax Authority in Israel when filing the annual tax return, either by the beneficiary or the trustee, as determined in the regulations. It is important to emphasize that at this stage this is only an initial draft of of the amended regulations.

 

For further information please contact Adv. (CPA) Daniel Paserman, Head of Tax (paserman@gornitzky.com).


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This brief memorandum provides general information and does not constitute or substitute any legal advice. As these issues are complex and of a circumstantial nature, which involve different tax and legal aspects, each case should be examined according to its individual circumstances.

January 12th, 2016

Adv Aviram Handel (Partner) presents estate planning options and obstacles when beneficiaries, assets and bank accounts are located around the world.

Adv Aviram Handel (Partner) presents estate planning options and obstacles when beneficiaries, assets and bank accounts are located around the world.

 

Read full article (Hebrew)

June 17th, 2013

In his article "Key Questions: Gifting an Apartment to Children," Adv. Aviram Handel analyzes the implications on both parents and children when parents gift an apartment to their children.  The author proposes alternatives to the "immediate gifting" model.

Hebrew Item
May 3rd, 2017

Daniel Paserman (CPA), Head of Tax, and Ofer Levy (CPA) in an update on how Israeli Banks are Increasing Enforcement of US Estate Tax on Israeli Investors.

Israeli Banks are Increasing Enforcement of US Estate Tax on Israeli Investors

 

US estate tax is imposed on U.S situs assets of a decedent, who is a non-resident, non-citizen of the U.S ("NRA"), including real estate assets in the U.S and certain securities of U.S corporations (unless the estate tax will be repealed as currently suggested). As opposed to US citizens and domiciliaries who are exempt from federal estate tax on estates up to an amount of USD 5,490,000, the NRAs’ exemption amount is merely 60,000 USD. The tax rates on taxable estates can reach up to more than 40% (depending on state estate tax as well).

 

Since many Israeli tax residents invest in US real estate and securities of US corporations, estate tax exposure regarding their US investments may exist. In addition, although an investment in securities of US corporations by NRAs may be exempt from capital gain taxation in the US, such an investment may be subject to US estate tax.

 

Until recently, as a matter of practice, Israeli banks have not enforced the US estate tax liability. However, it seems that a policy change has recently taken place, deriving, inter alia, from the Foreign Account Tax Compliant Act (“FATCA”), which requires Israeli banks to disclose financial information regarding their US clients to the US tax authorities. As a result, Israeli banks have increased enforcement on tax matters, including non-Israeli related tax matters. Recently, several Israeli banks have informed their clients that in order to inherit bank accounts that include US assets, an approval from the US Tax Authority for a tax exemption or payment of taxes may be required.

 

There are in fact several different alternatives for mitigating US estate tax exposure on NRAs’ investments in US real estate and securities of US corporations. Among the various alternatives, we note the use of trusts, life insurance, investing in ADRs and investing through foreign corporations.

 

A relatively simple and inexpensive solution for investing in securities of US corporations is through the use of an Israeli Family Company. An Israeli Family Company is treated for Israeli tax purposes as a ”Transparent Entity” and therefore its taxable income is regarded as the income of the company’s individual shareholder. Notwithstanding, from a US tax perspective, as a default matter, an Israeli family company is regarded as a corporation under “Check the Box” regulations (unless the corporation has elected to be treated differently). Thus, the investment in securities of US corporations will be excluded from the Israeli investor’s estate from a US estate tax perspective, as he holds shares in an Israeli corporation (as opposed to holding securities directly in the US corporations), while for Israeli tax purposes the taxation remains substantially similar, since the taxable income of the Israeli Family Company is attributed to the individual shareholder.

 

For further information please contact Adv. (CPA) Daniel Paserman, Head of Tax (paserman@gornitzky.com).

 

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November 20th, 2016

Daniel Paserman (Partner), Inbar Barak Bilu and Michal Karzbum surveying the main points of the voluntary disclosure procedure, now allowing diamond dealers to take part in the process (Hebrew)

July 21st, 2016

Partner Daniel Paserman (Adv., CPA.) in an article surveying the taxation of trusts in Israel, following the recent legislative amendments. 

September 17th, 2014

In their article on the the new Israeli voluntary disclosure program , Daniel Paserman and Yoav Kremer give an overview of the main criteria and the guidelines of the new program.  The program, which was launched on September 7, 2014, enables non-compliant taxpayers to come forward and arrange their reporting and tax obligations in exchange for which the Israel Tax Authority undertakes not to initiate any criminal proceedings against such taxpayers.