Update on Israeli Taxation of U.S. Trusts with Israeli BeneficiariesSeptember 2016 Bloomberg BNA Tax Planning International
Debra T. Hirsch co-authored the Bloomberg BNA Tax Planning International article, "Update on Israeli Taxation of U.S. Trusts with Israeli Beneficiaries."
Until 2014, Israel generally exempted from its income tax any trust that had been created by a foreign person, even if there were Israeli resident beneficiaries, and similarly did not seek to tax such Israeli resident beneficiaries on any distributions. But under new tax laws that became effective on January 1, 2014, many of these previously tax-exempt trusts and/or their Israeli resident beneficiaries have become subject to significant Israeli income tax liabilities and reporting obligations.
The law imposes reporting, as well as tax filing requirements. Therefore, it is essential for all trustees and trust beneficiaries subject to its provisions to be aware of and comply with the new law.