Israel Supreme Court Ruling Regarding Tax Residency

By Mirit Reif, Adv.

Recently, the Israeli Supreme Court ruled that a married businessman’s tax residency was in Israel, thus impacting his tax obligations in Israel, even though he spent a significant amount of time outside of Israel, tending to his businesses abroad and had “marital relationships” with other women while he was there.

The taxpayer had a wife and four children living in Israel. He worked in Israel and since 1991, started to engage in business activities in two other unspecified countries.

The Israel Tax Authority (ITA) determined that the taxpayer was a resident of Israel for years 2005 through 2007, and presented him with a tax assessment of NIS 830 million (around $230 million). The taxpayer appealed to the District Court, which ruled in the ITA’s favor in 2015. That decision was appealed to the Supreme Court.

Under the Israeli Income Tax Ordinance (ITO), an individual whose “center of life” is in Israel is considered to be a resident of the country for tax purposes.

According to the ITO, several factors determine what is considered the “center of life”:

  • The location of a taxpayer’s permanent home;
  • The taxpayer’s and his family’s place of residence;
  • The taxpayer’s regular place of work;
  • Where the taxpayer’s economic interests are located;
  • The place where the taxpayer is active in any organizations, associations, or institutions.

In addition, the law includes a rebuttable presumption that an individual is considered an Israeli resident for tax purposes if he is in the country for 183 days during the year, or spends at least 30 days in Israel during the tax year in question and a combined total of at least 425 days in Israel during the year in question and the two preceding years.

Although the taxpayer did not spend 183 days or more in Israel during any of the years for which the assessments were made, the Supreme Court, accepted the ITA’s position, and calculated that the taxpayer had been in Israel for a combined total of at least 425 days in any three-year period ending in the year of assessment, including days the taxpayer either arrived in or departed from Israel .


The taxpayer claimed that even though he remained married, he had lengthy, “marital relationships” with two other women in the foreign countries in which he did business. He claimed that he and his wife lead separate centers of life, his trips to Israel were so that he could visit his children, and that he remained married because of a desire to “not harm family honor.”

In considering his claims, the Court stated the following:

  • The taxpayer’s stays in Israel were ongoing and for long periods of time, not only for the years under appeal but also during the preceding and succeeding years.
  • The taxpayer spent holiday periods and some weekends in Israel and during this time he would stay with his wife and children in the family home.
  • The taxpayer deposited approximately $1 million annually into bank accounts in Israel, for the purpose of managing the household, and he maintained vehicles in the country during his visits.
  • The taxpayer’s decision not to divorce his Israeli wife can be interpreted in a way, which confirms his deep attachment to the community in Israel and to his children.
  • The taxpayer was not a citizen or resident of any other country and had refused to declare whether he paid tax in any other jurisdictions. According to the Court, nonpayment of tax in any other country might, in certain cases, “serve as an additional indication that weakens the taxpayer's claim that he maintains a center of life abroad.”
  • The taxpayer made an official declaration in 2005 indicating that he had investments in Israel “in the amount of tens of millions of shekels.” The fact that these investments might be small in relation to foreign countries, it is not enough to contradict the assumption of residency.

In contrast, in the 2014  case of Michael Sapir v. Kfar Saba Tax Assessor, CA 4862/1 (Sapir Case), the Supreme Court stated that although the center of life of an individual and his permanent abode are normally located where his family resides, there are married couples that choose to live separately. As a result, the Court accepted the possibility of split residence with respect to spouses and children.


The above decision regarding the center of life does not contradict the result of the Sapir Case. It only proves that when determining the tax residence of an individual, each case is different and all the facts and circumstances of the taxpayer should be examined in depth. When confronted with a similar case, it is important to seek professional advice in order to best understand your options.

The content of this article is intended to provide a general guide to the subject matter and is not a substitute for legal consultation. Specific legal advice should be sought in accordance with the particular circumstances.

Mirit Reif is a partner at Dave Wolf & Co. Law Firm that specializes in Estate, Taxation, Wealth Management, PPLI and Voluntary Disclosure Programs in the United States and Israel.