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Taxation of Trusts in Israel - Chapter 18 - Trusts and Estate Planning in Israel - Second Edition
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This chapter is from Trusts and Estate Planning in Israel, Second Edition
PAGE PREVIEW 18.1. THE ISRAELI TAX SYSTEM The Israeli Tax System taxes individuals based on their residency. Israeli residents are taxed on their worldwide income, while non-Israeli residents are subject to tax only on their Israeli-source income. 18.2. THE DEFINITION OF TRUST FOR ISRAELI TAX PURPOSES The Israeli tax treatment of trusts is addressed primarily in the Income Tax Ordinance (the “Ordinance”). Of the Ordinance defines a “trust” as “an arrangement, under which a trustee holds the trust assets for the benefit of a beneficiary in Israel or abroad, whether defined as a trust under statutes applicable to it or defined in some other manner.” This definition of a trust for tax purposes encompasses non-traditional trust arrangements where a “trustee” holds assets for another’s benefit. A trustee is defined as: (1) a person to whom assets or income from assets were transferred; or (2) a person who holds assets in trust. According to the Ordinance, several entities qualify as “trustees” for Israeli tax purposes, including Foundations (under the laws of Holland, Lichtenstein, Panama, the Bahamas or the Netherland Antilles), Establishments (under the laws of Lichtenstein) and Reg. Trust (under the laws of Lichtenstein).
Dr. Alon Kaplan, Advocate & Notary, is a member of the Israel Bar and was admitted as a member of the New York and Frankfurt Bars. He is the President and founder of the Society of Trust and Estate Practitioners “STEP Israel”. Academically speaking, he has a Ph.D. from Zurich University in Switzerland and an LL.B. and LL.M. from the Hebrew University of Jerusalem. Dr. Kaplan maintains a direct and close relationship with academia, and he was a lecturer on trusts in the Academic Management College, Reichman University, and the Law Faculty of Tel Aviv University, where he taught trust courses for LL.M. students. Dr. Kaplan is a popular lecturer on trusts in Israel and abroad. He constructed the academic program for the Trusts Diploma of STEP in Israel. Throughout his professional career, he has written numerous professional articles in legal journals, on matters of trusts, intergenerational asset transfers and selected commercial law topics such as agent and distributor laws, a topic which he researched for his LL.M. thesis. Dr. Kaplan has been a regular contributor of articles to Trusts & Trustees by Oxford University Press. He has written and edited numerous professional books, among these on doing business in Israel, on trusts in Israel, and on international trusts laws. His book, Trusts and Estate Planning in Israel, is a professional and comprehensive guidebook for practitioners in this area in Israel. Another important book in English is Trusts in Prime Jurisdictions, fifth edition, 2020 which reviews trusts in various jurisdictions by 19 authors from various jurisdictions. In December 2020 he was the co-editor of the book, Life Cycle of a Family Business, published in London. Meytal Liberman, Advocate and Notary, TEP, advises private clients in Israel and internationally on trusts and estate planning. Her services include legal structuring for the long-term holding, ownership, and management of assets, addressing legal incapacity, division of marital property, wills, and trusts. She has practiced in this field since 2012, combining legal work, academic study, and active participation in professional organizations, publications, lectures, and continuing legal education. Ms. Liberman was admitted to the Israel Bar in 2013 and licensed as a notary in 2024. She holds an LL.B. from Bar Ilan University (2012) and an LL.M. in Commercial Law from Tel Aviv University (2015). She is a full member of STEP, having earned a Diploma in International Trust Management following two years of study. Since 2018, she has been authorized by the Administrator General and the Israel Bar Association to draft and execute legal instruments for future incapacity planning, including the Enduring Power of Attorney, Expression of Wishes Document, and Preliminary Instructions for the Appointment of a Guardian. Her writing includes chapters in Asia-Pacific Trusts Law, Volume 2 (Bloomsbury, 2022), Trusts in Prime Jurisdictions (5th ed., Globe Law and Business, 2019), and Trust in Israel: Theory and Practice (2017, in Hebrew). Her work has also appeared in Trusts & Trustees, The International Family Office Journal, and STEP Journal. She lectures regularly at seminars and conferences, including events hosted by the Israel Bar Association and STEP.
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