A trust is an arrangement in which a trustee manages assets for the benefit of a beneficiary.
Israeli tax rules regarding trusts differ to the general tax regulations. Although they are detailed in the Income Tax Ordinance, sometimes it seems that this is a separate law written in a different language, one that stands alone, thus necessitating particular understanding.
Residents of Israel who establish trusts or benefit from trusts established for them must familiarize themselves with and take into consideration the ramifications of taxation and reporting requirements that apply to them and to trusts in Israel.
We offer tax advice and planning to various elements involved in trusts – grantors, beneficiaries, and trustees – to ensure that the existing structure of the trust does not create unnecessary tax arrears.
Areas of consultation include:
- Identifying and classifying the most suitable type of trust according to Israeli tax regulations and opening a file in the Tax Authority for beneficiaries.
- Deciding how the income from the trust will be reported:
The legislation on trusts offers different reporting options: reporting by trustees, grantors, or beneficiaries. Often this is a critical decision with significant tax ramifications and it cannot be changed once made.
As part of our consultation we try to understand whether it will be better for you to report on the trust as a separate entity or to attribute the trust’s income to the grantor or the beneficiary.
- Consultation before the division of properties from trusts, including division of an existing trust, with the aim of preventing liability to increased taxes, sometimes even double the tax paid in another country.
- Analysis of the trust deed and advice regarding the tax ramifications of changing it.
- Planning the dismantlement of trusts and understanding the tax ramifications for the benefit of multigenerational inheritance of trust assets.
Consultations are available in Hebrew and English, and we suggest also including in the meeting professionals specializing in foreign trusts to ensure full coordination.