Eretz Yisrael Time

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Friday, June 20, 2008
Before I say anything further, I want to make something clear, I am not condoning this behavior, I am not promoting this behavior, I am not recommending this behavior. I am merely pointing out that certain creative financial activities will soon be possible that weren’t possible before, and some people are going to take advantage of it.

Very soon there will be a new tax law in Israel for Olim who made Aliyah after January 1, 2008, unless someone stops it in its tracks (which doesn't seem likely at the moment).

The new law exempts the Olim, not just from paying taxes on ALL foreign (non Israeli) income (passive and active), but the law does not even require the new Oleh to even REPORT this income!!!

This creates some interesting possibilities in creative accounting.

For instance the Oleh can work for a US company they set up and own. The company can have a contract with an Israeli company for services. The Israeli company can pay the US company. They US company pays the Oleh everything as salary. Since the Oleh is living in Israel, up to a significantly large enough amount of salary/revenue is exempt from US taxes (except perhaps Social Security on the salary), and due to the new law he would be exempt from all Israeli taxes on his US salary . I'm not an accountant, but it might make more sense for him to take the salary as dividends and then avoid the Social Security entirely.

The more creative Oleh is going to perhaps discover even more interesting and profitable ideas, which to be honest, I’m not going to even dare to post here.

And finally, the extremely creative Oleh is going to soon realize that his new best friend will be an extremely creative Israeli.

I’d like to thank Nefesh B’Nefesh for sharing this information.

What a shame I already made Aliyah.

5 comments:

tnspr569 said...

Yikes.

You don't seem like the type to do that, Joe...

Renegade said...

Judging by the way the state treats it's (Jewish) citizens, I don't see why people should feel too bad about some "creative accounting"

Ben Bayit said...

The structure you outlined would be taxable under Israeli law since the exemption is for overseas income and this is not considered overseas income. Basically the exemption is meant to exempt the Olim from the personal assessment regime put in place a few years ago whereby residents of Israel are now taxed on world-wide income - irrespective of where it is earned. The exemption is only for OVERSEAS income, and even under the old tax regime, such a situation would have been considered income earned in Israel and not overseas.

Like anything in life, pay money to a good lawyer before setting up the scheme..............

Anonymous said...

It may be taxable, but it wouldn't be trackable due to explicit the reporting exemption.

JoeSettler said...

tnspr569:
I'm not, but it doesn't mean I can't think up the schemes.

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