Background
Under current Israeli tax law, an individual’s residency status is primarily determined by the “Center of Life” test, which considers personal, economic, and social ties to Israel. This is supplemented by numerical presumptions, which may be rebutted by either the taxpayer or the Tax Authority.
Because the test is substantively based, it has often led to disputes and considerable uncertainty. In 2021, the Committee for International Tax Reform—comprised of representatives from the Tax Authority and the private sector—recommended reducing this uncertainty by introducing conclusive residency presumptions based on the number of days an individual spends in Israel. These recommendations were the basis for a 2023 draft bill. However, public criticism that the bill did little to reduce ambiguity led to a new draft that largely disregards the committee’s findings and introduces a new framework.
This proposed new framework is based on a calculation of “Weighted Days of Stay,” assessed over the tax year in question, the two prior years, and the two subsequent years[1]. It includes definitive classifications for an “Israeli Resident” and “Foreign Resident.” According to the proposal, the current tax year includes all days spent in Israel (with any part of a day counting as a full day) as well as a weighted portion of the adjacent years. The proposal also adopts a recommendation from the original committee emphasizing a spouse’s residency, establishing stricter rules for individuals whose spouse is an Israeli resident.
Implications of the New Draft and Planning Challenges
One major consequence of the draft bill is that any individual who spends fewer than 183 days in Israel in a given year, but who accumulates 183 weighted days over three years, will be conclusively deemed an Israeli resident, with no possibility of rebuttal. Unlike the current regime—where an individual spending less than half a year in Israel can argue their center of life is abroad—such a claim would no longer be valid under the new rules. For example, spending 75 days or more in Israel but less than 183 days in one year, combined with 183 weighted days across three years, would result in automatic classification as an Israeli resident. Moreover, an individual spending as few as 30 days in Israel per year could still be deemed an Israeli resident if their spouse is an Israeli resident and such individual has 140 weighted days over three years.
Conversely, an individual would be conclusively classified as a Foreign Resident if they spent 74 days or fewer in Israel during the tax year and did not exceed 110 weighted days over three years. Alternatively, a couple—both spouses—who each spent 90 days or fewer in a given tax year and accumulated no more than 125 weighted days each over three years would also be considered Foreign Residents.
The draft also addresses partial-year residency. If an individual becomes an Israeli resident (after previously being a Foreign Resident), or severs their Israeli residency, they will only be considered an Israeli resident for part of that tax year—provided they did not spend more than 21 cumulative days in Israel outside of that residency period.
Example Scenarios
The Goldman Couple from New York
Arty and Beth Goldman live and work in New York. They own an apartment in Israel and visit annually to spend time with their grandchildren, ensuring they stay no more than 150 days per tax year in Israel. They reside in New York for the remainder of the year and are actively involved in their local community. Under the new draft, the Goldmans would be conclusively classified as Israeli Residents, without recourse. To remain outside this classification (though still in a gray zone), they would need to limit their time in Israel to an average of 120 days per year. To be definitively considered Foreign Residents, they must reduce their visits to no more than 73 days per year, or no more than 110 weighted days in total over 3 years —equivalent to an average of 95 days annually.
Ravit, High-Tech Entrepreneur
Ravit is married to Ram, an Israeli resident. She is a high-tech entrepreneur who divides her time between Silicon Valley and Israel, spending no more than 100 days per year in Israel. Her home and workplace are in Silicon Valley. Under the proposed rules, Ravit would be considered an Israeli Resident, with no option to contest the classification. To avoid this, she must reduce her average stay in Israel to no more than 96 days per year. To be definitively considered a Foreign Resident, despite her spouse’s Israeli residency, she must limit her stay to 75 days per year on average over 3 years.
Yoni and Keren, Postdoctoral Studies and High-Tech Relocation
Yoni, Keren, and their children are relocating to Boston in August 2025 for Keren’s postdoctoral studies. Yoni will work for the U.S. branch of his current Israeli employer. In 2024, the family spent 350 days in Israel; in 2025, they plan to spend 210 days. To avoid being classified as Israeli Residents for the 2026 tax year (and thereby also for 2025), the couple must limit their time in Israel to a fewer than 21 days in 2025 from August to December, and a fewer than 67 days in 2026.
Risk of Double Taxation and Treaty Protections
A major concern under the proposed draft is that individuals may be classified as Israeli residents and thus be required to report and pay Israeli taxes on foreign income. This raises the risk of double taxation if the individual is also classified as a resident by the other country.
To mitigate this, Israel has entered into tax treaties with most OECD countries. These treaties establish rules not only for determining which country has taxing rights but also for resolving dual residency through “tie-breaker” provisions, such as examining the location of one’s permanent home, habitual abode, center of vital interests, and—if needed—citizenship. Where tie-breakers do not resolve the issue, the tax authorities of the respective countries must reach an agreement through a mutual resolution process.
While treaty provisions may take precedence over domestic Israeli law, they remain open to interpretation. As a result, disputes are likely to continue. It’s also important to note that Israel has no tax treaty with certain countries, such as Cyprus. Individuals claiming Cyprus residency, for example, would have no treaty protection under the proposed law and may find themselves paying double tax, to both Cyprus, and Israel.
Summary
It is worth questioning why the Tax Authority largely abandoned the original committee’s recommendations without broader consultation. While the stated aim was to increase certainty and reduce disputes, it remains unclear whether that will be achieved—particularly given the existence of tax treaties, which add layers of complexity. If the bill is adopted, many who believed they were not Israeli residents may find they must now restructure their personal or business arrangements—if that is even possible.
That said, the effort to reduce uncertainty and enable individuals to plan their days in Israel is a welcome goal. However, the thresholds established in the draft appear overly narrow and risk drawing many unintended individuals into the Israeli tax net.
[1] The formula for calculating “Weighted Days of Stay” works as follows: In the tax year under review, the full number of days the individual stayed in Israel is counted. In the year immediately adjacent to the year under review (both the preceding and following year), one-third of the days spent in Israel are counted (for example, if a person stayed 150 days in Israel in the adjacent tax year, for the purpose of the formula, it will be considered as 50 days in Israel for that year). In the following adjacent year (both the years prior to and following such preceding and following year), one-sixth of the days spent in Israel are counted (so if a person stayed 150 days in Israel in that year, for the purpose of the formula, it will be considered as 25 days in Israel for that year). Each year may be examined based on one of several periods: the year under review and the two subsequent tax years; the year under review and the two adjacent tax years (the preceding and following years); or the year under review and the two preceding tax years.
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