From 6 April 2025, Britain’s existing non-dom resident tax regime will come to an end. The abolition of this status, made use of by more than 78,000 UK residents in the 2022-2023 tax year, will lead to dramatic changes for non-doms, whose worldwide assets will be subject to 40% inheritance tax rate. Unsurprisingly, many now residing in the UK are currently considering moving to other jurisdictions.
What conditions does Israel offer to new arrivals? At what point does the ten-year reduced tax regime of the Israeli equivalent of the UK’s resident non-dom status come into force? Why is it more peaceful to die in Israel than in Britain? Israeli lawyer Eli Gervits answers all these questions in an interview with Kommersant UK.
What are the criteria for relocating to Israel and obtaining residency?
At a conference I participated in, presenting pathways to citizenship or residency through investment in different countries, all the speakers had tables showing the sums to be paid for each family member to receive citizenship, permanent or temporary residence and so on. But I didn't have a table because there's no such requirement in Israel. Things are different in our country. Couples with at least one partner of Jewish heritage may find relocating here attractive. In the male line, this can be up to three generations back, while on the female line, there are no limitations. There are no other criteria, financial or otherwise, for becoming a citizen of Israel. Naturally, it's an expensive country to live in, but it's far from dull. Those keen to stay active in business and not yet ready to step into some form of retirement opt for Israel.
Who can become a tax resident of Israel and how?
Amongst Kommersant UK readers there are probably people who have already received an Israeli passport. For those without Jewish roots, it's a less viable option. But there is a third category of people who have the right to Israeli citizenship but have not yet received it and are weighing up the tax implications. Out of ideological conviction, as it were, many individuals from the post-Soviet space do not wish to pay the highest tax rates around. Oddly enough, this view is supported by the Supreme Court of Israel. In our country, minimising taxes within the bounds of the law is not just a right but an almost sacred duty of each citizen, lawyer, auditor and tax advisor. Of course, this must not be confused with tax evasion, a criminal violation of the law, but in Israel, there’s no need to evade taxes; you may simply pay a 0% rate.
The British tax system for resident non-doms has become more complicated and less convenient. In Israel, however, everything is far simpler; three categories of people have the right to ten-year tax holidays on passive overseas incomes; dividends, royalties, rental income and the sale of property. The first group is recent returnees to Israel, the second is people born or having lived a long time in Israel who have left the country for a long period, from six to ten years. There is another important intermediary category many people don't know about, often even those it includes. Many people think the ten-year tax holiday begins from the moment citizenship is received but this is not so; it begins when the centre of your life is transferred to Israel. So, for someone who received citizenship ten, twenty or thirty years ago and has never lived in the country, the tax holiday hasn't even started.
To be considered a tax resident of Israel, people must meet one of two main criteria. The first is that this hypothetical person, let's say they are Russian, spends 183 days a year in the country, for which they automatically receive residency. The second is someone spending less than 183 days a year in the country but who has moved the centre of their lives to Israel. For instance, their children may attend a local school and they may spend more time in Israel than in any other country and so on.
Many of our clients who spend little time in the country but wish to be its tax residents acquire residential property in Israel. It’s possible to purchase an apartment for your own residence and present utility bills to banks as legal proof of residence. You may register as an entrepreneur and buy and rent out another flat, or even several, file tax returns once every two months and pay taxes on this business. A limited company may be set up and its business activities integrated into your existing business to pay taxes in Israel. Of course, only on the profits from the Israeli company and not on the whole business.
Are there any hidden shortcuts or poorly known factors which facilitate the relocation of capital to Israel as seamlessly as possible?
The ideal environment has been created in Israel. On the one hand, there is no requirement to transfer capital to Israel in order to benefit from a decades-long tax holiday, unlike Russia’s fourth tax amnesty, which has such requirements. On the other, if you'd like to bring capital to Israel this will not create an additional tax burden on those funds, as is the case in England. When moving to Israel everything is set to allow you to spend your money in comfort.
In my view, this situation sits well with another global change. In 2005, the American political commentator Thomas Friedman wrote his book The World Is Flat: A Brief History of the Twenty-First Century, where he analysed the process of globalisation around the world. In 2014, an extended and updated version appeared, entitled The World is Flat: Further Updated and Expanded (Release 3.0), describing globalisation in its third form when, thanks to internet technology, people were able to compete with each other from any point on Earth. If another new version came out now, it would say that the world is ceasing to be global and is instead fragmenting. For instance, it is now becoming difficult to pay a large sum from a bank in one country to a bank in another country, even if it's being done literally between accounts and branches of the same bank.
A few years ago I wrote an article saying that you have to keep your money close to you, preferably in a country you won’t ever be told to leave. When the article was published, Roman Abramovich and other acquaintances living in different European countries, including Britain, received it rather sceptically, as they had previously my statement that there is an enormous difference between citizenship, which is forever, and a residence permit which you have today but the authorities may annul or fail to prolong tomorrow. However, when he was not able to continue his residence in England, he changed his point of view. In this context, Israel seems an even more attractive jurisdiction because here you can receive citizenship for life, not just a residence permit. This is particularly important nowadays.
Do they have inheritance tax in Israel?
In Israel, there are no taxes on gifts or inheritance. There are also no ring-fenced shares to be automatically passed to children, spouses, or parents, even against the deceased’s will. This is important because, when you are on the verge of eternity it's preferable to leave all your inheritance to named individuals and not 60% of it. In Britain, inheritance tax stands at 40% on sums exceeding £325,000 and 100% on accumulated assets, so we joke that rich people die more peacefully in Israel.
What kind of people are your clients?
People who grew up watching the same cartoons were born in the USSR or in the post-Soviet space and have Jewish roots. Although they’re mostly Russian-speaking, any language barrier may be overcome with an interpreter. We don't just speak the same language, we're on the same wavelength.
You can contact the lawyer Eli Gervits here.
