A new ruling by Israel’s National Labor Court in the Zander case is an important reminder for anyone planning a relocation outside Israel, already in the process of relocating, or advising employees and individuals through such a step. The ruling clarifies that the termination of Israeli residency is not determined solely by where a person lives or works, or by the acquisition of assets abroad. Conduct vis-à-vis the Israeli authorities is also relevant. As a result, steps sometimes taken “to be on the safe side” — such as continuing to pay insurance contributions or preserving rights available to Israeli residents — may later have a material bearing on residency status and on liability for National Insurance contributions and, potentially, tax.
Who Is This Update For?
This update is intended for individuals and families relocating abroad, employees moving overseas for work, employers supporting employees through relocation, and tax advisers, accountants and lawyers dealing with residency, National Insurance and related tax implications.
What Happened and Why Does It Matter?
On August 19, 2026, the National Labor Court issued its ruling in the Zander case, allowing an appeal by the National Insurance Institute and reversing the outcome reached by the Regional Labor Court. The ruling addresses when a move abroad results in the termination of Israeli residency for National Insurance purposes, and the significance of steps taken vis-à-vis the Israeli authorities during the relocation period.
The ruling has broad practical significance. It makes clear that even where there are substantial ties abroad — including relocation of one’s home, employment overseas, the purchase of a residence and the opening of a bank account — Israeli residency may nevertheless be found to have continued if the person’s actual conduct toward the National Insurance Institute and the Israel Tax Authority indicates an intention to preserve Israeli resident status.
What Changed?
The Regional Labor Court had held that a couple who left Israel and moved to Ireland were not Israeli residents in 2019 and therefore should not have been liable for Israeli insurance contributions in respect of their income in Ireland. The Regional Labor Court placed significant weight on the objective ties: leaving Israel, ceasing employment in Israel, purchasing a home in Ireland, working for foreign companies and spending an extended period abroad.
The National Labor Court, however, allowed the National Insurance Institute’s appeal and held that greater weight should also be given to the subjective element and to the couple’s conduct at the relevant time. In particular, the Court emphasized that the couple continued to pay insurance contributions in Israel, sought to preserve their rights with the National Insurance Institute, and claimed tax credit points as Israeli residents in their 2019 tax return. The Court viewed these circumstances as indicating that the process of terminating their Israeli residency had not yet been completed and that, at least during the interim period, the couple wished to preserve their status as Israeli residents.
How Could the Court Ruling Affect You?
The ruling demonstrates that, in a relocation context, it is not enough to consider only where you actually live or work. It is also necessary to consider how you present your status to the Israeli authorities and which resident rights you seek to preserve.
Accordingly, anyone relocating abroad should bear in mind that actions such as:
- paying National Insurance contributions in Israel;
- expressly asking to preserve resident rights;
- claiming tax benefits available to Israeli residents;
- keeping an “option to return” while preserving rights associated with Israeli residency.
may later be treated as indications that Israeli residency was not terminated.
This may result in exposure to Israeli insurance contributions and, in some cases, broader tax implications. Accordingly, both before and during a relocation, it is important to plan carefully and maintain a consistent and coordinated approach across tax, National Insurance, health insurance and the documents filed with the relevant authorities.
How Can We Help?
Our firm has extensive experience advising individuals and families on relocation matters, including residency determinations, tax and National Insurance implications, and dealings with the Israeli authorities. We would be pleased to assist with any questions or needs arising in this area.
The above content is a summary provided for informational purposes only and does not constitute legal advice. It should not be relied upon without obtaining further professional legal counsel.
