Israel or Foreign Resident? New Memorandum of Law Changes the Rules

On July 1, 2025, a memorandum of law was published for public comments proposing an amendment to the Israeli Income Tax Ordinance’s definition of “Israeli resident” for tax purposes.

The Income Tax Ordinance currently defines an “Israeli resident” as any individual whose  center of life is in Israel. “Center of life” is determined after examining the “totality of the individual’s familial, economic, and social ties.”

The Income Tax Ordinance currently presumes that an individual’s center of life is in Israel in any given tax year if the individual: (1) resided in Israel for 183 days or more during the tax year, or (2) resided in Israel for 30 days or more during the tax year and the cumulative period of stay in Israel during the tax year and during the two preceding years is 425 days or more.

This presumption is rebuttable, and an individual can claim that, although the period of stay in Israel is consistent with the presumption, his or her center of life is not in Israel. Vice versa, an individual, or the ITA, can claim that  Israeli residency for tax purposes exists, even if he or she did not reside in Israel for the minimum period during the tax year.

Key Provisions in the Proposed Draft Bill – Alternative Conclusive Presumptions

The amendment proposes to replace the rebuttable presumption with irrebuttable conclusive presumptions about whether an individual is an Israeli resident or a foreign resident. If one of the conclusive presumptions applies, the individual will be deemed an Israeli resident or a foreign resident without regard to his or her center of life. On the other hand, if no conclusive presumptions apply, then the current center of life test will be used.

The memorandum of law proposes conclusive presumptions that examine the number of days of stay in Israel during a tax year, and the weighted number of days of stay during a three-year period, as explained below.

“Weighted days of stay” are calculated as follows:

The weighted days of stay are calculated during a three-year period in order to ascertain whether the conclusive presumptions regarding an Israeli resident or a foreign resident apply. The memorandum of law proposes three alternative calculation periods of three years: (1) the tax year and the two preceding years; (2) the tax year and the two subsequent years; and (3) the tax year, the preceding year, and the subsequent year. For the purpose of calculating the tax year’s weighted days of stay, every day within the tax year will be considered a full day, every day in the previous or subsequent year will be considered as one-third of a day, and every day in the year that is either two years before or two years after the tax year will be considered as one-sixth of day.

An Israeli resident is defined as anyone who satisfies one of the following two conclusive presumptions:

1. The individual stayed in Israel for 75 days or more during the tax year, and cumulatively, for at least 183 weighted days of stay.
2. The individual stayed in Israel for 30 days or more during the tax year, and cumulatively, for at least 140 weighted days of stay, and his or her spouse satisfies presumption 1 above.

A foreign resident is defined as anyone who satisfies one of the following two conclusive presumptions:

1. The individual stayed in Israel for 74 days or less during the tax year, and for a maximum of 110 weighted days of stay in each of the alternative calculation periods.
2. The individual and his or her spouse resided in Israel for 90 days or less during the tax year, and for a maximum of 125 weighted days of stay in each of the alternative calculation periods.

Using 2025 as an example, let’s consider an individual who stayed in Israel for 140 days per annum in 2023-2025:

According to the current presumptions, since the individual stayed in Israel for 140 days in 2025, the presumption of 183 days per annum does not apply. Moreover, since the individual stayed in Israel for a cumulative total of 420 days between 2023-2025, the second presumption of 425 days over a period of three years also does not apply. Therefore, in the current situation, such individual will not be considered an Israeli resident unless the center of life test applies.

In contrast, according to the memorandum of law’s proposed presumptions, the weighted days of stay in 2023-2025 will be calculated as follows:

140 + 1/3 X 140 + 1/6 X 140 = 210

This means that, according to the new definition, the individual stayed in Israel for 140 days in 2025 (more than 75), and the individual’s weighted days of stay total 210 (more than 183). Therefore, according to the proposed conclusive presumptions, using this example, the individual will be considered an Israeli resident for tax purposes in 2025.

Moreover, the memorandum of law also proposes mechanisms to determine the exact date an individual becomes a new immigrant or a returning resident, and the exact date an individual who emigrates from Israel stops being deemed an Israeli resident for tax purposes.

The amendment takes effect as of the tax year subsequent to the inception date.

The Amendment’s Purpose and the Implications

The purpose of the draft legislation is to create legal certainty regarding individuals’ residency status, reduce frictions between taxpayers and tax assessors, and ensure uniformity in the Israel Tax Authority’s implementation of provisions of the Income Tax Ordinance.

However, we believe the legislation is too strict towards individuals, and includes people who are not residents of Israel and whose center of life is not in Israel under the definition of “Israeli resident.” Furthermore, the proposed legislation might prompt many individuals who do not manage their center of life in Israel to think twice about staying in Israel, since they would have to keep track of the number of days of their visits to avoid satisfying one of the irrebuttable presumptions of Israeli residency for tax purposes. Such rethinking could adversely affect individuals, their families, and even the State, which supposedly wants to promote visitors to Israel.

As to individuals who spend part of each year in Israel and the rest of the year in a treaty country, although the proposed amendment constitutes a major change in local law, it is doubtful it will have any significant impact in such individuals’ home country. If anything, the amendment might cause many individuals to be deemed residents of both countries. As a result, more discussions of “tie-breakers” in tax treaties might arise – which are usually based on the center of life test. Therefore, the decision-making on country of residence will return to the center of life test. If so, the proposed amendment will have a greater impact on individuals who spend their remaining time in non-treaty countries.

Recommendations and Preparations

Considering the potential implications of the proposed amendment, we recommend that anyone whose residency status in Israel is unclear seek expert advice and assistance, including, inter alia, checking the number of days of stay in Israel according to the three calculation periods, examining the new irrebuttable conclusive presumptions, examining any applicable international tax treaties, assessing the potential tax liability in Israel, and taking practical measures in advance as needed, such as changing residency plans, residency, or income structure. Our firm’s Tax Department is at your service to examine the impact of the memorandum of law on your personal situation.

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Adv. Hanna Daher, CPA, is a partner and Adv. Itiel Shloush is an associate in our firm’s Tax Department.

Barnea Jaffa Lande’s Tax Department, one of the leaders in its field in Israel, is  consistently ranked in both local and international legal directories. Our team provides comprehensive services to Israeli and international clients in a variety of fields: international taxation, individual and real estate taxation, employee remuneration, taxation of cryptocurrencies, incentives, and grants. The department collaborates with our firm’s Corporate Department to ensure creative and effective tax solutions for complex transactions and strategic tax planning, and represents clients before the Israel Tax Authority and in court.