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Israeli tax lawyer Doron Levy: “Countries are increasingly focused on preventing tax evasion”

Lawyer Doron Levy / Photo: Shay Ben Senior
Lawyer Doron Levy / Photo: Shay Ben Senior

The Amit, Pollak, Matalon & Co. (APM) law firm senior partner offers valuable insights into the intricate aspects of expatriation tax, emphasizing the significance of meticulous planning and seeking professional guidance for individuals contemplating relocation overseas

Sponsored content by Adv. Doron Levy

Moving from one country to another is becoming increasingly common in our interconnected world. However, many individuals may not realize the potential tax implications associated with such a move. Expatriation tax, often overlooked but significant, can significantly impact those relocating from their home country to another jurisdiction. To shed light on this complex topic, we sat down with Israeli tax lawyer Doron Levy, a senior partner in the Amit, Pollak, Matalon & Co. (APM) law firm, who heads its taxation and class action department.

In this interview, Adv. Doron Levy provides valuable insights into the complexities of expatriation tax, highlighting the importance of careful planning and professional advice for individuals considering moving abroad. His expertise clears up on the implications of this evolving area of taxation and underscores the need for proactive tax strategies in an increasingly globalized world.

Can you explain the expatriation tax and how it impacts individuals moving from one country to another?

"Expatriation tax, often referred to as exit tax, is a tax imposed by a country on individuals who cease to be tax residents of that country due to a change in residency status, typically when someone moves to another country. This tax is designed to capture unrealized gains or income that would otherwise go untaxed when the individual leaves the country of origin. It's essentially a way for the original country of residence to ensure it receives its share of taxes on accrued wealth or income before the taxpayer relocates".

Could you elaborate on the two main approaches to expatriation tax - the "exit tax" approach and the "trailing tax" approach?

"The "exit tax" approach involves treating assets and income as if they were realized at emigration, thus subjecting them to immediate taxation. This method ensures that the original country of residence captures any accrued gains or income before the taxpayer relocates. On the other hand, the "trailing tax" approach defers the tax liability until the assets are realized or the income is received after emigration. The purpose is to prevent taxpayers from exploiting tax advantages by relocating to countries with more favorable tax regimes".

How does Israel address expatriation tax, and what are the implications for Israeli residents moving abroad?

"Israel, like many other countries, has adopted provisions to address expatriation tax. Amendment No. 132 introduced Section 100a of the Ordinance, which imposes tax consequences on Israeli residents who emigrate. Under these provisions, assets and income are subject to tax as if they were realized during emigration, following the exit tax approach. This ensures that Israel can tax the increase in value of assets or income accumulated while the individual was an Israeli resident".

Can you give an example?

"Of course. A successful entrepreneur based in Israel, let’s call him Amir, has decided to relocate to Canada with his family to explore new business opportunities and enjoy a change in lifestyle. As he prepares for the move, Amir learns about the potential implications of the expatriation tax on his financial assets".

Relocation to a new country can be challenging / Photo: Canva
 Relocation to a new country can be challenging / Photo: Canva

Lawyer Doron Levy added: "During his time in Israel, Amir has accumulated substantial wealth through investments in Israeli stocks and real estate. He is aware that Israel imposes an exit tax on individuals who cease to be tax residents, which means that any unrealized gains on his investments could be subject to taxation during emigration".

"His decision to relocate involves weighing the financial consequences of expatriation tax against the benefits of pursuing new opportunities abroad. By proactively managing his tax liabilities and seeking expert advice, Amir aims to navigate the complexities of expatriation tax and make informed decisions for his family's future in Canada".

What are some common challenges or concerns individuals face with expatriation tax, particularly when moving from Israel to another country?

"One of the primary challenges is navigating the complexities of tax treaties between Israel and the destination country. Tax treaties often determine which country has the primary right to tax certain types of income or gains, which can impact the application of expatriation tax. Additionally, individuals must consider how their assets will be treated upon emigration and whether they will face immediate tax consequences or deferred liabilities".

Are there any specific strategies or considerations individuals should be aware of when planning to relocate from Israel to another country to minimize their exposure to expatriation tax?

"Planning is crucial for minimizing expatriation tax liabilities. Individuals should seek professional advice before their planned move to understand the tax implications and explore potential strategies. For instance, timing the realization of gains or income before emigrating can be beneficial. Understanding the tax treaties between Israel and the destination country can also help structure assets and income to optimize tax outcomes".

Finally, how do you see the future of expatriation tax evolving globally, and what trends or developments should individuals be aware of?

"The trend towards stricter enforcement of expatriation tax will likely continue globally. Countries are increasingly focused on preventing tax evasion and ensuring their tax base is protected, especially with the rising mobility of individuals across borders. Individuals should stay informed about changes in tax laws and regulations in their home and destination countries to manage their tax obligations when relocating effectively", concludes Israeli tax lawyer Doron Levy.

In conclusion, the expatriation tax is a significant consideration for individuals moving across borders. By understanding the nuances of this tax concept and leveraging professional advice and strategic planning, individuals can navigate expatriation tax more effectively and optimize their tax outcomes when relocating internationally.

Lawyer Doron Levy / Photo: Shay Ben Senior
Lawyer Doron Levy / Photo: Shay Ben Senior
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