Dear Clients,
We would like to update you that, on June 1, 2026, a new and significant judgment was issued by the Tel Aviv-Jaffa District Court, which may materially affect the manner in which tax residency is examined. Income Tax Appeal (Tel Aviv) 62960-01-23 involved Haim Tzach, a businessman who had conducted business for many years outside Israel, primarily in Nigeria, while maintaining significant ties to Israel.
The judgment is an important reminder that the fact that a person’s principal business activity is conducted abroad does not, in itself, rule out Israeli tax residency. In appropriate circumstances, particularly where strong family ties, actual residence, substantial physical presence in Israel, and the conduct of ordinary day-to-day life in Israel are present, the tax authorities and the courts may find that the individual’s center of life remains in Israel, even where a significant parallel center of life exists abroad.
The Court held that the appellant was an Israeli resident throughout the tax years at issue, rejecting his arguments that he was a foreign resident or, alternatively, a senior returning resident. The ruling is significant in that it makes clear that even extensive and ongoing business activity outside Israel does not, in itself, establish a severance of residency.
The decision was based primarily on the fact that the “days presumption” under the Income Tax Ordinance applied in his case (183 days in a tax year, as well as a total of 425 days during that tax year and the two preceding years), and that the appellant failed in overcoming it. In addition, the Court examined the entirety of his family, social, and economic ties and concluded that his center of life was in Israel. In this respect, the judgment shows that residency is not determined solely by the place of business activity, but rather by the overall picture of the person’s life.
Among other things, the Court gave significant weight to the following considerations, which together led to the conclusion that the appellant’s center of life remained in Israel:
- His extensive and frequent presence in Israel over the years.
- The existence of a permanent home in Israel available for his use.
- His substantial family ties to Israel, including an ongoing relationship with his wife and daughters.
- The maintenance of an ordinary course of life in Israel, including the use of bank accounts, a car, a mobile phone, medical services, participation in elections, and social involvement.
- Ongoing transfers of funds to Israel to support the household and the family.
- Subjective indications showing that he himself regarded Israel as a relevant center of life, at least during some of the years.
On the other hand, the Court recognized that the appellant had substantial business and economic ties to Nigeria, as well as a permanent residence there, but held that these were not sufficient to outweigh the strength of his ties to Israel and the day-count presumption that applied in his case. In this respect, the judgment reflects a recognition of the complex reality in which a person may maintain genuine life ties in two countries simultaneously, without this preventing a determination that he remains an Israeli resident for tax purposes.
The Court also rejected the appellant’s alternative argument that he should be regarded as a senior returning resident. It held that, in the years preceding the tax years at issue, the days presumption applied to him, and that this was not sufficient to support recognition of him as a foreign resident for the period required to qualify for that status.
Beyond its substantive ruling on residency, the judgment also serves as a reminder of the importance of carefully managing assessment and objection proceedings, including raising procedural arguments on time. While the Court accepted certain arguments relating to limitation issues in part, it made clear that arguments not raised at the appropriate stage may not be considered later.
Practical Implications and Potential Exposure
In recent years, the Israel Tax Authority has increased its reviews of individuals with international activity, entrepreneurs, business owners, families who have relocated, new immigrants, and returning residents. In this context, the judgment may have significant and broad implications for many other cases.
The judgment forms part of a clear trend toward a careful examination of tax residency, giving real weight to a person’s actual conduct. Tax residency is not determined solely by declarations, nor only according to the place of business activity or the place where income is generated. Rather, it is determined through a broad and substantive review of the individual’s overall life circumstances. At the same time, the judgment also highlights the real exposure to complex residency disputes and, in some cases, even the risk of double taxation.
Accordingly, anyone considering relocating abroad, returning to Israel, or seeking to rely on foreign resident, new immigrant, or senior returning resident status, should carefully examine in advance all tax aspects, patterns of presence, the location of the family unit, the existence of a relevant tax treaty, and the documentation supporting their position. Without proper planning, the result may be significant tax exposure and complex disputes with the Israel Tax Authority.
Our firm advises individuals, families, entrepreneurs, and business owners on matters relating to tax residency, immigration to and return to Israel, relocation, international tax planning, and dealings with the Israel Tax Authority. We would be pleased to assist in reviewing the specific circumstances of any case.
This update includes general information only and does not constitute legal advice or a substitute for legal advice. In every specific case, a separate discussion should be held based on its particular circumstances.
