Private Client Comparative Guide

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1 Legislative framework

1.1 Which legislative provisions govern private client matters in your jurisdiction?

Private client matters in Israel are governed by a set of core statutes spanning succession, family property, capacity, trusts, taxation, real estate, procedure, and cross-border enforcement. The principal framework for estates is the Succession Law, 5725-1965, complemented by the Succession Regulations, 5758–1998, and the Family Courts Law, 5755–1995, which consolidates jurisdiction over family and status matters. Personal status, marriage, and divorce are largely religion-based; for Jews, the Rabbinical Courts Jurisdiction (Marriage and Divorce) Law, 5713–1953 applies, alongside the Spouses (Property Relations) Law, 5733–1973, and the Family Law Amendment (Maintenance) Law, 5719–1959. Issues of capacity, guardianship, and Ongoing/Enduring Powers of Attorney are addressed by the Legal Capacity and Guardianship Law, 5722–1962. Planning and fiduciary arrangements are governed by the Trust Law, 5739–1979, and the Gift Law, 5728–1968, with real property aspects under the Land Law, 5729–1969, and land registration legislation. Tax considerations derive primarily from the Income Tax Ordinance [New Version], 5721–1961, which includes the the taxation of trusts and residency rules and expanded reporting obligations. Purchase and sale of real estate situated in Israel is taxed under the Real Estate Taxation (Appreciation and Purchase) Law, 5723–1963. Corporate vehicles are regulated by the Companies Law, 5759–1999 while financial services are regulated under laws such as the Securities Law, 5728–1968, and the Control of Financial Services (Insurance) Law, 5741–1981. Cross-border recognition and enforcement are addressed by the Enforcement of Foreign Judgments Law, 5718–1958, and the implementation of relevant Hague Conventions. Compliance overlays include the Prohibition on Money Laundering Law, 5760–2000 and the Counter-Terrorism Law, 5776–2016.

1.2 Do any special regimes apply to specific individuals (eg, foreign nationals; temporary residents)?

Israeli law provides several special regimes for specific categories of individuals, particularly foreign nationals, Israeli residents for the first time, Senior Returning Residents and Returning Residents.

For tax purposes, the Income Tax Ordinance [New Version] (the "Ordinance") grants significant benefits to those who became tax residents of Israel for the first time, and to Senior Returning Residents (individuals who return to Israel after being foreign residents for at least 10 consecutive years). These individuals enjoy a ten-year exemption from Israeli tax on foreign-sourced income (including business income) and capital gains on sale of assets outside Israel. Until recently, those individuals were also exempt from reporting on their foreign-sourced income and on their foreign assets. However, a law enacted in April 2024 cancelled the reporting exemption for Israeli residents for the first time and Senior Returning Residents who arrive in Israel after January 1, 2026.

The Ordinance also provides a tax exemption for Returning Residents (individuals who return to Israel after being foreign residents for at least 6 consecutive years). These individuals enjoy a five-year exemption from Israeli tax on passive foreign-sourced income, and a ten-year exemption on capital gains on sale of assets outside Israel, that were acquired before the return of the individual to Israel.

Foreign nationals who are not Israeli residents are generally taxed only on income derived from Israeli sources, subject to applicable double taxation treaties. Israel has an extensive network of tax treaties that may reduce withholding taxes on dividends, interest, and royalties.

In the context of succession and estate matters, Israeli courts have jurisdiction over the estate of any person domiciled in Israel at the time of death or who left assets in Israel, regardless of nationality. However, the substantive law governing succession may be that of the deceased's domicile at death, in accordance with the Succession Law, 5725–1965.

Temporary residents and foreign nationals may also be subject to specific reporting and compliance requirements under Israel's anti-money laundering and tax transparency frameworks, including Common Reporting Standard (CRS) and the Foreign Account Tax Compliance Act (FATCA) obligations.

1.3 Which bilateral, multilateral and supranational instruments in effect in your jurisdiction are of relevance in the private client sphere?

Israel's private client landscape relies primarily on domestic private international law rather than supranational frameworks. Israel is not a party to the Hague Convention on the Law Applicable to Trusts and on their Recognition (1985). Recognition of foreign documents and cross-border formalities commonly relies on the Hague Apostille Convention (1961), which Israel has implemented, easing the evidentiary use of public documents (wills, probate orders, corporate extracts) through apostille rather than consular legalisation. Cross-border succession issues are addressed under Israel's Succession Law 5725–1965 and forum rules; there is no separate multilateral succession instrument widely applied by Israel.

In tax matters, Israel's extensive bilateral double tax treaty network is central, particularly for relief from double taxation, information exchange, and mutual agreement procedures. Israel has implemented the OECD Common Reporting Standard (CRS) for the automatic exchange of financial account information and participates in the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, facilitating wide tax cooperation. Israel has also implemented the OECD BEPS Multilateral Instrument (MLI), which modifies many of Israel's bilateral tax treaties regarding treaty abuse, permanent establishment, and dispute resolution. With the United States, Israel operates under a FATCA intergovernmental agreement, resulting in reciprocal reporting by Israeli financial institutions.

There are no Israeli estate, gift or inheritance taxes and no estate/inheritance tax treaties.

Anti-money laundering and counter-terrorist financing measures follow FATF standards, with beneficial ownership transparency applicable to entities and relevant financial arrangements. It is forbidden to engage in business with designated enemy countries (currently Iran, Iraq, Syria, and Lebanon), and financial institutions may face difficulties dealing with entities from jurisdictions on international AML blacklists (e.g., FATF lists) or those lacking diplomatic relations with Israel. Israel is not part of the EU, so EU private international law instruments do not apply.

2 Taxation

2.1 On what basis are individuals subject to tax in your jurisdiction (eg, residence/domicile/nationality)? How is this determined?

In Israel, individual income tax liability is based on a personal principle, which is determined according to the tax residency of the individual. Tax residency is determined based on the "Center of Life" test. The Ordinance provides that an individual is considered an Israeli resident if his or her center of life is in Israel.

The Ordinance also establishes a statutory presumption based on the number of days spent in Israel, this presumption is rebuttable: an individual is presumed to be a resident if they are in Israel for 183 or more days in a tax year, or for 30 or more days in a tax year and a total of 425 days over that year and the preceding two years.

In determining an individual's center of life, all the individual's family, economic, and social ties are taken into account. Among other factors, the following are examined:

• The location of the individual's permanent home;
• The place of residence of the individual and his or her family members;
• The place of the individual's regular or permanent business or employment;
• The location of the individual's material economic interests;
• The individual's participation in organizations, associations, or institutions.

2.2 When does the personal tax year start and end in your jurisdiction?

The tax year begins on January 1 and ends on December 31. Under the Ordinance, annual tax returns must be filed no later than April 30 following the end of the tax year.

2.3 With regard to income: (a) What taxes are levied and what are the applicable rates? (b) How is the taxable base determined? (c) What are the relevant tax return requirements? and (d) What exemptions, deductions and other forms of relief are available?

(a) What taxes are levied and what are the applicable rates?

Income tax is imposed on the income of an Israeli resident derived or accrued in Israel, or abroad, and on the income of a non-resident derived or accrued in Israel, according to the sources listed in Section 2 of the Ordinance:

• Income or profit from a business or vocation;
• Income or profit from employment;
• Dividends, interest and linkage differentials;
• Pensions, annuities, or annuity;
• Rent, royalties, key-money, premiums, or other profits derived from real estate or industrial buildings;
• Gains or profits derived from any assets;
• Gains or profits derived from agriculture;
• Consideration received for the sale of a patent or design by the inventor;
• Income or profit from any other source not specifically listed.

Tax Rates

Income from business, profession, or employment: The tax rates applicable to individuals are set in Section 121 of the Ordinance, and are progressive (graduated tax brackets).

• For income not derived from personal exertion, the applicable tax rates range between 31% and 47%.
• For income derived from personal exertion (or for any individuals aged 60 and above), the tax rates range between 10% and 47%.

Dividend Income: Under Section 125B of the Ordinance, the tax rate on dividends received by an individuals is 25%, unless the individual is a Substantial Shareholder, in which case the rate is 30%.

A "Substantial Shareholder" is a person who, directly or indirectly, alone or together with another, holds at least 10% of any type of control interest in a corporation.

"Means of Control" in a corporation include:

1. The right to profits;
2. The right to appoint a director or CEO, or similar officers;
3. Voting rights at the general assembly;
4. The right to a share in remaining assets upon liquidation;
5. The right to instruct another holder of such rights on how to exercise them;

whether by virtue of shares, rights to shares, or any other arrangement, including voting or trust agreements.

Interest Income: Under Section 125C of the Ordinance, the tax rate on interest is 25%, unless the interest is paid on a non-index-linked asset, in which case the rate is 15%.

Interest received by a Substantial Shareholder is taxed at the individual's marginal rate (between 31% and 47%).

Rental Income from Residential Property: Israeli tax law provides three alternative regimes for taxing rental income derived by an individual from residential property:

• Regular marginal tax rates – under Section 121 of the Ordinance, subject to the general rules applicable to individuals (including the benefits detailed below).
• Flat tax rate – under Section 122 of the Ordinance, a flat rate of 10% on the gross rent income The individual may not deduct depreciation or expenses incurred in producing the income, nor offset any credit, or exemptions.
• Exemption regime – under the Income Tax (Exemption from Tax on Income from Letting Residential Apartments) Law, a tax exemption would apply to individuals renting out residential apartments. The exemption is applicable to a rental income threshold of ILS 5,654 per month. If the total rent does not exceed this amount, the income is fully exempt. If the rent exceeds the threshold, the exemption is proportionally reduced, and the excess portion is taxed at the individual's marginal rate.

In addition, Israel imposes a surtax on high income, known as the "Additional Tax": Under Section 121B of the Ordinance, an individual whose taxable income in a tax year exceeds ILS 721,560 (for the years 2025–2027) is subject to an additional 3% tax on the portion exceeding that threshold.

A recent amendment (Section 121B(a1)) further provides that an individual whose Taxable Capital Income exceeds the same threshold, is subject to an additional 2% tax on the portion of such capital income exceeding the threshold.

"Taxable Capital Income" is defined as any taxable income that is not business, professional, employment, or other personal exertion income.

(b) How is the taxable base determined?

The tax base in Israel is founded on the "Source Theory". This means that, for certain income to be subject to tax, it must have a recognized source under the Income Tax Ordinance specifically, under Sections 2 and 3 of the Ordinance for ordinary income, or under Section 91 of the Ordinance for capital gains. The tax base includes only those types of income that are defined by the Ordinance as taxable.

An individual's final tax liability is calculated based on his or her taxable income, which is defined as total income after deductions, offsets, and exemptions.

(c) What are the relevant tax return requirements?

Section 131 of the Income Tax Ordinance specifies who is required to file an annual tax return:

• An individual who is an Israeli resident, aged 18 or older during the tax year, whose income exceeds the amount prescribed in the Ordinance;
• A spouse who declares his or her income separately (the default rule is that spouses income is calculated jointly);
• A non-resident individual who had taxable income derived in Israel during the tax year;
• A company that had income during the tax year;
• A person who, during the tax year, sold a right in real estate or carried out a transaction in a real estate association;
• Persons with reporting obligations regarding trusts (see details below);
• A controlling shareholder in a Foreign Professional Services Company;
• Persons with reporting obligations in connection with reportable transactions;
• An individual claiming not to be an Israeli resident, despite meeting the statutory day-count presumption, must detail his or her position and attach supporting documentation;
• An individual who transferred funds abroad during a 12‑month period in an amount exceeding NIS 500,000;
• Any person required to do so by a demand from the Assessing Officer.

The tax return must include details of the income earned by the filer during the tax year, as well as any other relevant information.

Reporting Obligations Regarding Trusts (under Section 131(a)(5b) of the Ordinance):

The following persons are required to file annual reports in connection with trusts:

• A trustee of an Israeli Residents Trust (where the settlor did not elect to be the taxpayer under the Ordinance), or a trustee of a Testamentary Trust which is considered to be an Israeli resident;
• A trustee who had income or assets in Israel (even if the trust is not an Israeli resident);
• A settlor or beneficiary, as well as a representative settlor or representative beneficiary who elected to be the taxpayer under the Ordinance;
• A beneficiary who received a distribution from a trustee, even if such distribution is not taxable in Israel (unless it relates to property whose source is outside Israel, to a beneficiary of a foreign residents' trust, or to a beneficiary of a testamentary trust where all beneficiaries are foreign residents);
• An Israeli resident beneficiary aged 25 or older, with respect to his or her status as a beneficiary (unless unaware of such status), where the value of the trust's assets is not less than NIS 500,000.

Additional Reporting Obligations Regarding Trusts:

• Settlor's Notice Obligation – Section 75P1(a) of the Ordinance provides that an Israeli resident settlor who, during the tax year, created a trust or transferred to a trustee any asset or income, must file a notice with the Tax Authority within 90 days from the date of creation of the trust or the transfer. The notice must include details of the settlors, beneficiaries, trustee, and protector (if any), and the residency of each; details of the assets or income transferred; and the date of transfer.
• Section 75P1(c) provides that a settlor of a Foreign Residents Trust that became an Israeli residents' trust, or a Foreign Beneficiary Trust since the settlor became an Israeli resident, must file a notice with the Tax Authority by April 30 of the year following the tax year in which the settlor became an Israeli resident, or as part of Form 131 filed by the settlor.
• Trustee's Notice Obligation – Section 75P2(a) of the Ordinance provides that a trustee must file a notice with the Tax Authority regarding the following matters:
• • Establishment of a Testamentary Trust – within 90 days from the date of establishment;
  • Reclassification of a type of an existing trust – by April 30 of the year following the tax year in which the change occurred, unless the trustee is already required to file a return under Section 131 of the Ordinance;
  • Termination of a trust (Israeli Residents' Trust / Testamentary Trust considered an Israeli resident / trust that holds assets in Israel upon termination) – by April 30 of the year following the tax year in which the trust was terminated, unless the trustee is already required to file a return under Section 131 of the Ordinance.
• Section 75P2(c) of the Ordinance provides that a trustee who is an Israeli resident of a trust not required to file a return under Section 131, must file a notice with the Tax Authority within 90 days of the creation of the trust, specifying the controlling persons of the trust and their residency. If the controlling persons change during the tax year, the trustee must file an updated notice by April 30 of the following tax year.

(d) What exemptions, deductions and other forms of relief are available?

Exemptions under Section 9 of the Ordinance – Amounts deducted from income before calculating taxable income.

Section 9 of the Israeli Income Tax Ordinance sets out a list of personal exemptions, each subject to specific qualifying conditions. Examples include:

• Exemption for income from personal exertion earned by a blind or disabled individual;
• Severance pays received by an employee;
• Indexation differentials on a bank deposit or savings plan received by an individual;
• Exchange rate differentials earned by a company controlled by foreign residents;
• Exchange rate differentials on a loan granted by a foreign resident;
• Interest on bonds purchased by a foreign resident, as well as interest, discount fees, and indexation differentials on exchange-traded bonds held by a foreign resident;
• Amounts withdrawn by an employee or self‑employed individual from an education fund;
• Partial exemption for income from rent received by an individual.

Deductions – Section 17 of the Ordinance – Expenses allowed as deductions from income for the purpose of calculating taxable income.

To determine an individual's taxable income, deductions are permitted for expenses incurred wholly and exclusively in the production of that income during the tax year only.

The section also provides a list of deductible expenses, including:

• Interest and indexation differentials;
• Rent;
• Repairs;
• Bad debts;
• Employer contributions to a pension fund;
• Contributions to an education fund for self‑employed individuals;
• Losses due to natural disasters or air attacks;
• Depreciation expenses;
• Expenses related to the payment of tax.

Offsets – Section 28 of the Ordinance – A mechanism allowing the offset of losses incurred in one tax year against income earned in other years, as part of the taxable income calculation.

Section 28 deals with the offset of ordinary (business) losses and provides that a loss from a business incurred by an individual in a tax year, which would have been taxable had it been a profit, may be offset against the individual's taxable income from other sources under the Ordinance in that same tax year.

If the taxpayer is unable to fully utilize the loss in the following tax year, the unutilized portion may be carried forward to subsequent years, where it will first be offset against business or professional capital gains.

However, if three specific conditions are met, the taxpayer may offset the loss against any taxable income.

Tax Credits – Amounts deducted from the tax liability itself, rather than from the income base. Examples include:

Foreign Tax Credit – Section 200 of the Ordinance:

Foreign taxes paid on foreign‑source income that is also taxable in Israel may be credited against Israeli tax.

In addition, Israel is a party to double taxation treaties with more than 50 countries worldwide.

These treaties establish the applicable tax rules for income and assets connected to both jurisdictions.

As treaties take precedence over domestic law, their provisions regarding foreign tax credits are relevant to determining the credits available to Israeli residents.

Credits for Payments to Pension and Insurance Funds – Section 45A:

An individual is entitled to a tax credit for amounts paid by him or by his or her spouse during the tax year as follows: 25% of amounts paid for life insurance; 35% of amounts paid to a pension fund for annuity purposes. The Ordinance defines how to determine the maximum credit ceiling.

Credit Points – The Income Tax Ordinance provides for credit points, which represent a fixed, index‑linked monetary amount deducted from taxable income during the tax year.

Currently, the value of one credit point is ILS 2,904.

Examples of common credit points include:

• Section 34: Credit for an Israeli resident – 2 credit points;
• Section 35(a): Credit for a new immigrant – varying rates: 1/12 of a credit point per month during the first 12 months; 1/4 per month during the following 18 months; and 1/6 per month during the subsequent 12 months;
• Section 40(a): Credit for children – an Israeli resident individual is entitled to credit points that vary according to the child's age.

2.4 With regard to capital gains: (a) What taxes are levied and what are the applicable rates? (b) How is the taxable base determined? (c) What are the relevant tax return requirements? and (d) What exemptions, deductions and other forms of relief are available?

(a) What taxes are levied and what are the applicable rates?

Section 91 of the Income Tax Ordinance establishes the tax liability on capital gains.

• A company is subject to tax on real capital gains at the corporate tax rate, which currently stands at 23%.
• An individual is subject to tax on real capital gains at a rate not exceeding 25%. However, where the gain arises from the sale of securities and the individual is a Substantial Shareholder, the applicable tax rate is 30%.
• Capital gains from the sale of non‑indexed securities are taxed at a rate of 15%, or 20% if the seller is a Substantial Shareholder.

(b) How is the taxable base determined?

Calculation of taxable capital gain under the Ordinance is based on the principle of taxing only the real capital gain, after deducting the inflationary component.

The calculation of the real capital gain is made by separating the nominal gain into two components: the inflationary component (exempt / subject to a reduced tax rate) and the real component (fully taxable).

Capital gain is the amount by which the consideration (sale price) exceeds the adjusted cost basis.

The inflationary amount may be taxable or exempt:

• Assets acquired up to December 31, 1993 – tax liability is 10%.
• Assets acquired from January 1, 1994 onward – exempt.
• Asset acquired before January 1, 2003 are taxed at marginal tax rate (progressive tax brackets);
• Asset acquired between January 1, 2003 and December 31, 2011 – tax rate is 20% (or 25% if the taxpayer is a Substantial Shareholder selling shares);
• Asset acquired after January 1, 2012 – tax rate is 25% (or 30% if the taxpayer is a Substantial Shareholder).

(c) What are the relevant tax return requirements?

Section 91(d) of the Income Tax Ordinance provides that, upon the sale of an asset, the seller is required to submit to the Assessing Officer, within 30 days from the date of sale, a report detailing the calculation of the capital gain or loss realized and the tax due on the sale, and to pay an advance payment accordingly.

(d) What exemptions, deductions and other forms of relief are available?

Capital Gains Exemptions: Section 97 of the Income Tax Ordinance sets out cases in which a capital gain is exempt from tax. The main exemptions include:

Gifts – A gift to a relative is exempt from tax. A gift to an individual who is not a relative will also be exempt if the Assessing Officer is satisfied that the gift was made in good faith (provided that the recipient is not a foreign resident).

Foreign Residents – A foreign resident is exempt from capital gains tax on the sale of securities traded on the Israeli stock exchange, unless the gain is attributable to a permanent establishment in Israel.

A foreign resident is generally exempt from capital gains tax on the sale of shares in an Israeli resident company, subject to certain conditions.

Israeli Residents for the First Time and Returning Residents – Exemption from capital gains tax on the sale of an asset located outside Israel, if the sale occurs within ten years from the date they became Israeli residents.

Offset of Capital Losses: Section 92 of the Income Tax Ordinance provides that a capital loss incurred by an individual in a tax year shall first be offset against real capital gains, and any remaining balance shall be offset against taxable inflationary amounts in proportionate relation.

A capital loss from assets located outside Israel shall first be offset against capital gains derived from assets located outside Israel.

2.5 With regard to inheritances: (a) What taxes are levied and what are the applicable rates? (b) How is the taxable base determined? (c) What are the relevant tax return requirements? and (d) What exemptions, deductions and other forms of relief are available?

In Israel, there is no inheritance tax or estate tax. Accordingly, the mechanism known as the "Step Up" principle does not apply. The capital gain is therefore calculated based on the date and price at which the deceased originally acquired the asset.

The heir will pay tax on the total gain — covering both the period during which the deceased held the asset and the period during which the heir owned it following the inheritance.

In cases where the deceased (or donor) was a foreign resident who bequeathed or gifted to an Israeli resident an asset located outside Israel, it is possible, under certain conditions, to obtain a new cost basis as of the date of death or the date of the gift.

2.6 With regard to investment income: (a) What taxes are levied and what are the applicable rates? (b) How is the taxable base determined? (c) What are the relevant tax return requirements? and (d) What exemptions, deductions and other forms of relief are available?

2.7 With regard to real estate: (a) What taxes are levied and what are the applicable rates? (b) How is the taxable base determined? (c) What are the relevant tax return requirements? and (d) What exemptions, deductions and other forms of relief are available?

(a) What taxes are levied and what are the applicable rates?

The relevant law is the Real Estate Taxation (Appreciation and Purchase) Law. This law governs two principal taxable events:

1. the sale of a right in real estate located in Israel, and
2. an action in a real estate association in Israel.

Appreciation Tax – This tax is imposed on the seller for the capital gain derived from the sale of the real estate right.

The applicable tax rate depends on the date of acquisition of the property, as follows:

• Property acquired before November 7, 2001 – the gain is taxed at the maximum marginal tax rate, currently 47%.
• Property acquired between November 7, 2001 and January 1, 2012 – the gain is taxed at a rate of 20%.
• Property acquired after January 1, 2012 – the gain is taxed at a rate of 25%.

Additional Tax on High Income – Section 121B of the Income Tax Ordinance (as referenced above in Section 2.3) also applies to capital gains tax, since such gains form part of an individual's taxable income (5% surtax).

Purchase Tax – This tax is imposed on the purchaser for the acquisition of a right in real estate, or for an action in a real estate association, in an amount equivalent to that which would have been payable on the sale of a real estate right.

The purchase tax is calculated as a percentage of the purchase value.

The rates of purchase tax vary depending on the type of property (whether it is a residential apartment) and the status of the purchaser (whether it is the purchaser's only residential apartment).

• Acquisition of a right in real estate that is not a residential apartment – the purchase tax rate is 6% of the value of the acquired right.
• Acquisition of a right in real estate that is a residential apartment after August 1, 2013 – the purchase tax rate is progressive, ranging between 5% and 10%.

When the purchaser is an Israeli resident individual acquiring his or her first residential apartment, reduced rates apply, ranging between 0% and 10%.

(b) How is the taxable base determined?

Appreciation Tax – The capital gain is the amount by which the sale value exceeds the adjusted acquisition value.

Adjusted Acquisition Value – Defined as the acquisition value after adding the amounts allowed as deductions under Sections 39 and 39A of the Real Estate Taxation Law that were incurred up to the date of sale, plus the value of expenses paid after the date of sale, and after deducting depreciation.

Calculation of Tax Rates on the Real Capital Gain – The tax rates applicable to the real capital gain, which vary across different periods, are determined through a linear calculation that allocates the real gain proportionally among the relevant periods, thereby establishing the applicable tax rate for each period.

Purchase Tax – The purchase tax is based on a percentage of the sale value of the acquired right. The value for tax calculation purposes is the amount that would be expected from the sale of the right by a willing seller to a willing buyer.

(c) What are the relevant tax return requirements?

Section 73 of the Real Estate Taxation Law sets out the reporting and declaration requirements imposed on sellers and purchasers in real estate transactions. These declarations constitute a self‑assessment by the taxpayers and serve as the basis for the assessment process conducted by the Real Estate Taxation Authority.

Time for Declaration – Both the seller and the purchaser are required to submit a declaration to the Director within 30 days from the date of sale or purchase.

Method of Submission – The declaration must be submitted electronically through a computerized system specifically developed for this purpose.

(d) What exemptions, deductions and other forms of relief are available?

Appreciation Tax – Exemptions and Reliefs:

• Exempt Residential Apartment – Exemption from appreciation tax is granted upon the sale of a qualifying residential property that constitutes the seller's sole residence and whose value does not exceed approximately ILS 5 million, pursuant to Section 49A of the Real Estate Taxation Law.
• For residential property exceeding this value, the seller is entitled to a proportional exemption. An additional condition for the exemption is that the seller must be an Israeli resident, or a foreign resident who does not own a residential property in the country of his or her residence.
• Preferred Linear Exemption – Under Section 49B,. for any apartment purchased after January 1, 2014, the real capital gain is taxed at a rate of 25%. For apartments purchased before that date, the portion of the gain accrued up to that date is exempt, while the portion accrued thereafter is taxed at 25%.
• Gift between certain close relatives – transfer for no consideration of real estate from a parent to a child, or vice-versa, is exempt from appreciation tax.

Purchase Tax – Benefits and Reduced Rates:

• Transfer to a Close Relative without Consideration – In the sale of a real estate right without consideration from an individual to a close relative, the purchase tax shall be one‑third of the regular purchase tax rate.
• Disabled Person, Blind Person, Casualty, or Family Member of a Fallen Soldier – The purchase of a real estate right by these populations is subject to a 0.5% purchase tax rate, subject to conditions and limitations.
• Business of a New Immigrant – The purchase of a real estate right by a new immigrant, where the property is used for a business or agricultural holding of the new immigrant, is subject to a 0.5% purchase tax rate up to approximately ILS 2 million, and 5% on the portion exceeding that amount.
• Residential Apartment for a New Immigrant – In the purchase of a residential apartment by a new immigrant, reduced rates apply: up to approximately ILS 2 million – full exemption; from approximately ILS 2 million to ILS 6 million – 0.5%; any amount exceeding that amount is subject to the regular purchase tax rate. Additional conditions for the relief include: the sale price does not exceed approximately ILS 20 million, the purchase occurs within the prescribed period, and the benefit may be granted only once.
• Exemption by Virtue of Capital Gains Tax Exemption – The sale of a real estate right that is exempt from capital gains tax under certain defined sections is also exempt from purchase tax.

2.8 With regard to any other direct taxes levied in your jurisdiction: (a) What taxes are levied and what are the applicable rates? (b) How is the taxable base determined? (c) What are the relevant tax return requirements? and (d) What exemptions, deductions and other forms of relief are available?

In addition to the direct taxes detailed above — income tax (including corporate tax), capital gains tax, and real estate taxation (including capital gains tax on real estate and purchase tax), there are several other common levies in Israel:

• Municipal Taxation – Payments that residents are required to make to the municipality of the city in which they live, such as property tax.
• Tax on Gambling, Lotteries or Prizes – The Income Tax Ordinance prescribes the taxation method for prizes and receipts derived from lotteries. The applicable tax rate is 35%.

2.9 With regard to any indirect taxes levied in your jurisdiction: (a) What taxes are levied and what are the applicable rates? (b) How is the taxable base determined? (c) What are the relevant tax return requirements? and (d) What exemptions, deductions and other forms of relief are available?

(a) What are they and what are the applicable rates?

There are several types of indirect taxes in Israel:

• Value Added Tax (VAT);
• Customs Duty – a tax imposed on the importation of goods and services;
• Purchase Tax – imposed on certain consumer products such as cigarettes;
• Excise Tax on Fuel – imposed on fuel producers and distributors.

Value Added Tax (VAT):

The Israeli VAT Law is based on the principle of imposing a broad indirect tax on all economic activity in the economy, while maintaining a uniform tax rate — currently 18% — which ensures neutrality and efficiency in tax collection.

(b) How is the taxable base determined?

Value Added Tax (VAT) is imposed on:

• Transactions in Israel: The sale of an asset, or the provision of a service by a dealer during business.
• Import of goods.

The VAT system is based on the taxation of the production chain, whereby each dealer pays tax only on the value added contributed by that dealer to the product.

The transaction price includes any other expense that the purchaser is required to reimburse the seller for, including commissions, interest, and compensation for breach of contract.

(c) What are the relevant tax return requirements?

Obligation to Submit a Periodic Report:

A taxpayer is required to submit to the Director a periodic report for each prescribed reporting period, even if during that period there were no transactions or activities generating a tax liability (unless the business has ceased operations entirely and the taxpayer has notified the Director accordingly).

Generally, the reporting period is one month; however, a dealer whose annual turnover is relatively low (approximately ILS 1.7 million) may report once every two months.

The periodic report must be submitted within 15 days after the end of the reporting period.

An exempt dealer (whose annual turnover does not exceed ILS 120,000) is not required to submit periodic reports but must file an annual declaration by January 31 of each year, stating the total turnover for the preceding year.

(d) What exemptions, deductions and other forms of relief are available?

Input Tax Deduction:

A dealer is entitled to deduct from the tax payable by him the input tax included in a duly issued tax invoice, in an import declaration, or in another document approved by the Director.

Input tax eligible for deduction is the VAT imposed on the sale of goods or the provision of services to a dealer, provided that such goods or services are used for the purposes of the dealer's business or during its operations.

Input tax may not be deducted unless it relates to a transaction that is subject to VAT.

The deduction must be made within six months from the date of issuance of the invoice or document.

Zero‑Rated Tax:

Section 30 of the VAT Law lists transactions that are subject to zero‑rate VAT.

This means that the dealer does not pay output tax on the transaction but is still entitled to deduct input tax, making this a significant benefit.

The purpose of this provision is to encourage activity in certain sectors of the economy, such as export promotion.

Examples of transactions listed in this section include:

• Export of goods;
• Sale of an intangible asset to a foreign resident;
• Services to a foreign resident (subject to certain limitations);

Exemption from VAT:

Section 31 of the VAT Law provides a list of exceptions in which VAT is not imposed, including:

• Exemption for rent of residential property;
• Exemption for transactions of an exempt dealer – an exempt dealer is a person whose annual turnover does not exceed ILS 120,000 (the amount is updated annually);

3 Succession

3.1 What laws govern succession in your jurisdiction? Can succession be governed by the laws of another jurisdiction?

Estate and succession matters and procedures in Israel are governed by the Succession Law, 5725–1965 and the Succession Regulations, 5758–1998.

Israeli courts may apply the laws of another jurisdiction in succession matters in specific circumstances. Under the Succession Law, 5725–1965 the general rule is that succession is governed by the law of the deceased's domicile at the time of death. The domicile of a person is determined according to the center of their life at the time of death. Therefore, if the deceased was domiciled outside Israel, the Israeli court will apply the foreign law of that domicile.

In addition, with respect to assets located outside Israel, even if the deceased was domiciled in Israel, the court will examine the applicable law in the jurisdiction where those assets are situated (lex situs). If the law of that jurisdiction expressly provides that succession to such assets shall be governed only by its own local rules, the Israeli court will apply that local law with respect to those assets only.

However, if the law of the foreign jurisdiction refers succession matters to the law of a third country (renvoi), the Israeli court will not follow such reference and will instead apply the law of the jurisdiction where the assets are located. Nevertheless, if the law of the jurisdiction where the assets are located refers back to Israeli law (remission), the Israeli court will apply Israeli law.

3.2 How is any conflict of laws resolved?

Conflicts of laws in matters of succession are resolved in Israel according to the private international law rules set out in the Succession Law, 5725–1965. Israeli courts acquire jurisdiction over succession matters if the deceased was domiciled in Israel at the time of death or left assets in Israel. Once jurisdiction is established, the court must determine which law to apply.

If the deceased was domiciled in Israel, Israeli law governs the succession. However, for assets located abroad, the court will obtain an expert opinion on the foreign law to determine how that jurisdiction resolves the conflict of laws and will apply the principles outlined in the previous answer.

When foreign law applies, the Succession Law, 5725–1965 provides that any interpretation of terms or concepts within that foreign law shall be made according to Israeli law. For example, if a foreign jurisdiction mandates that only its local law applies to immovable property within its territory, but the definition of "immovable property" differs between Israel and that jurisdiction, the Israeli court will apply the Israeli interpretation.

Furthermore, Israeli courts will refuse to apply foreign law if it discriminates on grounds of race, religion, gender, or nationality, or if it contravenes Israeli public policy.

Regarding escheat, under Israeli law, when the deceased has no relatives by blood, marriage, or adoption, the estate passes to the State of Israel. If a foreign state claims that assets located in Israel should pass to someone not entitled to inherit under Israeli law, Israel will apply the foreign law only on a reciprocal basis - that is, only if the foreign jurisdiction recognizes Israel's right to inherit when there are no heirs as defined under Israeli law.

3.3 Do rules of forced heirship apply in your jurisdiction?

Israeli law does not recognize the principle of forced heirship. Instead, it places significant emphasis on testamentary freedom, allowing individuals complete discretion to distribute their property as they wish, even to the exclusion of their entire family.

However, the Succession Law, 5725–1965 provides limited protection for certain dependants of the deceased, specifically a surviving spouse, children, or parents, by granting them the right to claim maintenance from the estate, even if they were not named as beneficiaries under a valid will.

This right to maintenance is not automatic; dependants must actively apply for it. Moreover, the right is narrowly defined and intended solely to ensure basic financial support, rather than to create a substantive inheritance entitlement.

3.4 Do the rules of succession rules apply if the deceased is intestate?

The Succession Law, 5725–1965 provides that succession is governed by law unless the deceased left a valid will. Where the deceased died intestate, the distribution of the estate is made in accordance with the statutory rules of intestate succession.

The statutory heirs are the surviving spouse at the time of death, the deceased's children and their descendants, the deceased's parents and their descendants, and the deceased's grandparents and their descendants.

The order of priority is as follows: children take precedence over parents, and parents over grandparents. If an heir from a closer degree of relationship exists, heirs from more remote degrees do not inherit.

The surviving spouse's share varies depending on who else survives. In all cases, the spouse receives the household chattels, including the passenger vehicle, which typically belong to the joint household.

Regarding the rest of the estate, if the deceased left children, their descendants, or parents, the spouse receives half of the remaining estate. If the deceased left siblings, their descendants, or grandparents but no children or parents, the spouse receives two-thirds of the entire estate. If the couple was married for at least three years and resided together in a dwelling included in the estate, and there are no children or parents, the spouse receives the deceased's entire share in that dwelling and two-thirds of the remaining estate. If the deceased left only a spouse, with no children, siblings or their descendants, parents, or grandparents, the spouse inherits the entire estate.

Children share equally. If a child predeceases the deceased and leaves children, those grandchildren inherit their parent's share by representation.

If there are no statutory heirs, the estate passes to the State of Israel for educational, scientific, health, and welfare purposes.

3.5 Can the rules of succession be challenged? If so, how?

When a person dies intestate, the statutory rules of succession govern the distribution of the estate. These rules themselves cannot be challenged; however, their application in a specific case may be contested. The process begins once an application for a succession order is submitted to the Registrar. After filing, the Registrar issues a public notice and sets a limited period for objections. Any interested party may submit an objection on grounds such as the existence of a valid will that renders intestate distribution inapplicable, the identity of heirs where a listed heir is not legally entitled or a legitimate heir has been omitted, the share of heirs where the proposed distribution does not comply with the Succession Law, 5725–1965, or lack of jurisdiction where the court does not have authority to adjudicate the matter.

When an objection is filed, the case is transferred to the court for determination. Even after a succession order has been granted, an application for amendment or cancellation may be submitted. These applications are more complex than objections because the applicant must justify the delay and demonstrate that relevant facts were unknown before the order was issued. Court decisions in succession matters are subject to appeal as of right, and the deadline for appealing a decision of the Registrar of Succession is fifteen days from the date the decision is served.

A person who acquired rights in good faith and for consideration in reliance on a valid succession order remains protected even if the order is later amended or cancelled.

4 Wills and probate

4.1 What laws govern wills in your jurisdiction? Can a will be governed by the laws of another jurisdiction?

Wills in Israel are governed by the Succession Law, 5725–1965, which sets the core rules on their creation, validity, interpretation, and revocation. The Succession Regulations, 5758–1998 provide procedural guidance, while the Notaries Law, 5737–1977 regulates notaries, who are recognized authorities before whom wills may be made. The Legal Capacity and Guardianship Law, 5722–1962 defines the legal capacity required to make a valid will.

Under Israeli law, foreign law may apply to a will in two contexts: (1) the formal validity of the will, and (2) the substantive law governing the estate. This answer addresses the first aspect - the formal validity of the will, the following answer will address jurisdiction and the applicable substantive law.

Israeli law takes a broad and flexible approach to formal validity. A will is recognized as valid in Israel if it complies with the formal requirements of any one of several legal systems: Israeli law; the law of the place where the will was made; the law of the testator's domicile or habitual residence at the time of making the will or at death; the law of the testator's nationality at those times; or, for immovable property, the law of the place where the property is located (lex situs). Compliance with any one of these systems suffices, even if the will does not meet the requirements of the others.

This liberal approach also extends to the capacity of the testator and witnesses. Regarding the substantive law governing the will and the estate, Israeli courts generally apply the law of the testator's domicile at death or, in some cases, the law of the location of the assets.

4.2 How is any conflict of laws resolved?

Conflicts of laws regarding wills are resolved in Israel according to the private international law rules set out in the Succession Law, 5725–1965. Similar to intestate succession, Israeli courts must determine two key issues: whether they have jurisdiction to adjudicate the will, and which substantive law applies.

Jurisdiction is established if, at the time of death, the testator was domiciled in Israel or left assets in Israel. The relevant time for determining domicile is the time of death, not the time the will was made. Thus, for example, if a person executed a will in New York but later moved their center of life to Israel, the Israeli court would have jurisdiction to address the will. Likewise, if a person lived and died in New York but owned assets in Israel, the Israeli court would have jurisdiction over those assets.

As to the applicable law, the court will apply the substantive law of the testator's domicile at the time of death. Domicile is determined by the individual's center of life. However, with respect to assets located outside Israel, the court will apply the law of the jurisdiction where those assets are situated (lex situs), particularly if that jurisdiction's law provides that only its own rules govern succession or testamentary matters relating to such assets.

Accordingly, while Israeli law governs wills of testators domiciled in Israel, foreign law may apply to specific assets or aspects of the will, depending on their location and the applicable conflict of laws principles.

4.3 Are foreign wills recognised in your jurisdiction? If so, what process is followed in this regard?

Foreign wills are recognized and may be enforced in Israel, subject to an Israeli probate process. A crucial point is that Israel does not recognize foreign probate court orders; therefore, upon the death of a non-resident owning assets in Israel, a separate probate proceeding must be initiated in Israel to transfer those assets. For a foreign will to be probated, it must first be deemed formally valid. Israeli law adopts a broad and flexible approach in this regard. A will is considered valid in Israel if it complies with the formal requirements of any one of several legal systems: Israeli law; the law of the place where the will was made; the law of the testator's domicile or habitual residence at the time of making the will or at death; the law of the testator's nationality at those times; or, for immovable property, the law of the place where the property is located (lex situs). Compliance with any one of these systems is sufficient.

This liberal approach also extends to the testator's capacity to make a will and, where relevant, to the capacity of witnesses. If the will's validity relies on foreign law, an expert legal opinion confirming its validity under that law must be submitted with the probate application.

The process for probating a foreign will for probate in Israel involves filing a request for a Probate Order with the Registrar of Successions. together with a request for a Probate Order. The application must include the will and other foreign documents (such as the death certificate) duly authenticated by apostille. If the will is not written in Hebrew or Arabic, a notarized translation into Hebrew or Arabic must be attached, though the Registrar may waive this for wills in English. If the original will has been filed for probate in another country, there is a special procedure to request an Israeli probate order based on a duly authenticated copy.

4.4 Beyond issues of succession discussed in question 3, are there any other limitations to testamentary freedom?

Testamentary freedom is a cornerstone of Israeli inheritance law, rooted in the principle of individual autonomy and recognized as part of the constitutional rights to human dignity and property. However, this freedom is not absolute. Under the Succession Law, 5725–1965, any commitment to make, amend, or revoke a will is void, as is any clause that restricts the testator's right to change or revoke the will. Agreements concerning the inheritance of a living person or any waiver of inheritance during that person's lifetime are likewise invalid.

A will must be a personal act of the testator, executed freely and without coercion, fraud, or undue influence, and it cannot contain provisions that are illegal, immoral, or impossible to fulfill. A will made by a minor, a person lacking legal capacity, or someone who did not understand the nature of the act is null and void. These limitations are designed to safeguard the authenticity of the testator's intent and uphold the integrity of the testamentary process, while maintaining a balance between private autonomy and public order.

4.5 What formal requirements must be observed when drafting a will?

Under the Succession Law, Israeli law recognizes four exclusive forms of wills, each with distinct formal requirements:

1. A handwritten will – A handwritten will must be written entirely in the testator's own hand, bear the date, and be signed by the testator.
2. A will made in the presence of witnesses – A will is valid if it is written (not necessarily handwritten), dated, and signed by the testator in the presence of two witnesses, after the testator has declared before them that this is the testator's will. The witnesses must attest with their signatures on the will that the testator has made the declaration and has signed the will. The will may be handwritten or printed, but the signatures must be in the handwriting of the testator and the witnesses, and they must sign on the date of the making of the will, not on a later date.
3. A will made before an authority – A will made before an authority is a will whose provisions are stated orally and are read out to the testator by the person in authority. The authority may be a judge, a Court Registrar, the Registrar of Successions, or a member of the Religious Court.
4. An oral will – Also known as a "Deathbed Will," this possibility only arises if the testator is on their deathbed or in circumstances where they reasonably regard themselves as facing death. In such a case, the testator may orally declare a will before two witnesses who understand the testator's language. The testator's directions and the circumstances of the making of the will must be recorded in a memorandum signed by the two witnesses and deposited with the Registrar of Successions. An oral will becomes void if the testator is still alive one month after making the will or if the circumstances which warranted its making have changed.

It should be noted that the court is empowered with discretion to validate a will even if the will is defective or missing certain formal requirements (such as a signature or date), or is defective as to the capacity of witnesses.

4.6 What best practices should be observed when drafting a will to ensure its validity?

To ensure the validity of a will and minimize the risk of it being challenged, several best practices should be observed during drafting. These include strict compliance with the formal requirements prescribed by law, verifying the testator's mental capacity and free will, preventing any involvement of beneficiaries in the drafting process, and using clear and unambiguous language. These principles safeguard the authenticity of the testator's intent, which cannot be verified after death.

Compliance with formal requirements is essential. The Succession Law, 5725–1965 recognizes four exclusive forms of wills, each with specific formal requirements. Precise adherence to these requirements ensures the will's authenticity and confirms the testator's full understanding and intent.

Verification of capacity and free will is another critical element. The testator must be legally competent - over 18, not legally incapacitated, and fully aware of the nature and consequences of making a will. The testator should understand the extent of their assets, the identity of potential heirs, and the implications of their testamentary choices.

Avoiding undue influence and beneficiary involvement is equally important. A will made under undue influence is void. Therefore, it must reflect the testator's independent and genuine intent. Beneficiaries must not participate in drafting the will, as their involvement creates a presumption of undue influence and invalidates any provision made in their favor.

Finally, clarity of expression is vital. The will should be drafted in clear, precise, and unambiguous language to reflect the testator's intent within the document itself, reducing the need for external interpretation and minimizing potential disputes among heirs.

4.7 Can a will be amended after the death of the testator?

After the death of the testator, a will cannot be changed at the discretion of heirs or any other party. However, the court may correct provisions that contain an error if it can be clearly demonstrated what the testator's true intention would have been had the error not occurred. Such corrections aim to fulfill the testator's genuine intent rather than create a new will.

To amend a will on the basis of error, the court must be satisfied that three cumulative conditions exist. First, there must be an error relating to fact, law, or motive that is fundamental and central to the testator's decision. Second, a direct causal link must exist between the error and the provision sought to be corrected. Third, the testator's intended direction must be ascertainable with certainty; if this cannot be established, the provision is void. The burden of proof rests with the party requesting the amendment. The law favors correction over annulment, reflecting the principle of preserving the testator's intent.

While the will itself cannot be amended, the beneficiaries may, after the probate order is granted, mutually agree to a different allocation of the estate's assets among themselves by signing an allocation agreement.

Additionally, a probate order issued by the Registrar or the court may be amended or revoked if new facts emerge that were not presented when the original order was granted.

4.8 How are wills challenged in your jurisdiction?

A will can be contested by filing an objection to a probate order with the Registrar of Successions. Once the objection is submitted, the case is transferred to the Family Court, where the probate application is treated as a civil proceeding: the applicant for probate becomes the plaintiff, and the objector is the defendant. The court then examines the merits of the objection.

The objection must be filed within two weeks from the publication of the probate application on the Administrator General's website. It must state the grounds for challenge, include supporting evidence, and be verified by affidavit. Common grounds include lack of testamentary capacity, undue influence, involvement of a beneficiary in drafting or witnessing the will, formal defects, duress, threat, fraud, deceit, mistake, and the existence of another will, which is considered a classic basis for objection.

Once a probate order is granted, it remains valid and binding. However, the Registrar or the Family Court may amend or revoke the order if new facts or arguments arise that were not previously considered. If the Registrar determines that the applicant could have presented these facts earlier but failed to do so within a reasonable time, the matter will be referred to the court. Anyone who acquired rights in good faith based on a valid probate order is protected, even if the order is later amended or revoked.

4.9 What intestacy rules apply in your jurisdiction? Can these rules be challenged?

Under Israeli law, when a person dies intestate, the distribution of the estate is governed by the Succession Law, 5725–1965. Statutory heirs include the surviving spouse, the deceased's children and their descendants, parents and their descendants, and grandparents and their descendants. The order of priority is determined by degree of kinship: children take precedence over parents, and parents over grandparents. The surviving spouse is entitled to household chattels and a share of the remaining estate, which varies depending on which relatives survive. If no statutory heirs exist, the estate passes to the State of Israel for public purposes.

These rules themselves cannot be challenged, as they are mandatory provisions of law. However, their application in a specific case may be contested. An objection may be filed after publication of a succession application, on grounds such as the existence of a valid will, incorrect identification of heirs, improper calculation of shares, or lack of jurisdiction. If an objection is submitted, the matter is transferred to the Family Court for determination. Even after a succession order is granted, an application for amendment or cancellation may be made if new facts emerge. Rights acquired in good faith under a valid order remain protected.

5 Trusts

5.1 What laws govern trusts or equivalent instruments in your jurisdiction? Can trusts be governed by the laws of another jurisdiction?

In Israel, trusts are primarily governed by the Trust Law, 5739–1979, which regulates creation and validity, trustees' powers and duties, beneficiaries' rights, and judicial supervision and remedies. Testamentary trusts are governed by the Succession Law, 5725–1965 (wills, probate, executors, and court oversight). Public/charitable trusts are additionally subject to regulatory oversight by the Registrar of Charitable Trusts (registration, governance, reporting). Taxation of trusts is governed by the Ordinance which classifies trusts (e.g., Israeli Resident, Foreign Beneficiary, Israeli Beneficiary and relatives', Foreign Resident and Testamentary Trusts) and sets residency, sourcing, reporting, and withholding rules. Depending on the assets/activities, sectoral regimes may also apply (e.g., Companies Law, 5759–1999, and Securities Law, 5728–1968, and Control of Financial Services (Insurance) Law, 5741–1981).

A trust may be governed by the laws of another jurisdiction if the trust instrument includes an express governing-law clause. Israeli courts generally respect such choice of law under Israeli private international law principles, particularly for non-Israeli trusts. However, mandatory Israeli rules may still apply in specific contexts, including: tax residency and reporting under the Income Tax Ordinance; lex situs rules for immovables in Israel; regulatory requirements for public/charitable activities; and Israeli public policy. For testamentary trusts, the Succession Law's, 5725–1965 conflict-of-laws rules may affect validity and administration where the decedent had a strong Israeli nexus.

5.2 How is any conflict of laws resolved?

Israeli courts address trust-related conflicts of laws by applying general private international law principles together with specific statutory regimes for succession and mandatory rules. For inter vivos trusts, an express governing-law clause in the trust instrument is typically upheld; absent such a clause, the court identifies the law with the closest and most real connection to the trust, considering factors such as the place of administration, the trustee's domicile, the location of key assets, and the governing law of underlying relationships. Rights in rem in immovable property located in Israel are governed by the lex situs, so Israeli property law applies to Israeli real estate regardless of the trust's chosen law. For movables, claims, and securities, the closest-connection test applies, with corporate issues often following the law of incorporation. Testamentary trusts are subject to the Succession Law's, 5725–1965, conflict-of-laws rules: Israeli probate jurisdiction may arise based on domicile or assets in Israel; material succession generally follows the law of the deceased's domicile at death; and wills benefit from broad validation rules for formal validity. Even where foreign law governs the trust, Israeli mandatory rules may still apply, including tax classification and reporting, regulatory oversight of charitable activities conducted in Israel, anti–money laundering and beneficial ownership disclosure, and Israeli public policy.

5.3 What different types of structures are available and what are the advantages and disadvantages of each, from the private client perspective?

Israeli law permits a wide range of private-client trust structures under the Trust Law, 5739–1979, and the Succession Law, 5725–1965, complemented by tax classifications in the Ordinance. A primary motivation for establishing trusts in Israel is asset protection, given the absence of inheritance and estate and gift taxes. Core forms include inter vivos trusts and testamentary trusts, which are commonly used for estate planning, asset protection, and nuptial protection. Inter vivos trusts can be fixed-interest or discretionary, revocable or irrevocable, and may include protective/spendthrift features.

Advantages: Lifetime control over governance and asset protection; continuity and privacy; tailored distribution and succession planning (including for minors or vulnerable beneficiaries).

Disadvantages: Formal setup and ongoing administration; potential Israeli tax and reporting complexity; irrevocability limits flexibility; creditor and family-law challenges if improperly structured.

Testamentary trusts are created by will and supervised through probate. Advantages: take effect at death without inter vivos transfers; can integrate with broader estate plans and executorial administration; Disadvantages: probate oversight may reduce privacy and add timelines; challenges to the will may affect the trust's implementation; less scope for lifetime testing of terms and trustees.

From a tax-residency angle, common categories include Israeli Resident trusts, Foreign Resident trusts, Foreign Resident Beneficiary trusts, Israeli Resident Beneficiary trusts and "Relatives' trusts," and Testamentary trusts. Advantages vary: properly structured Foreign Resident or Relatives' trusts can mitigate Israeli taxation on non-Israeli income and simplify reporting; Testamentary trusts may achieve deferral and clarity. Disadvantages: misclassification risks, unexpected Israeli taxation, CFC/PFIC look-through, or reporting penalties; changes in settlor/beneficiary residency can recharacterize the trust; anti-avoidance and substance requirements limit aggressive planning.

Charitable/public trusts offer donation deductibility and mission focus but require registration, governance, and regulatory reporting.

5.4 Are foreign trusts recognised in your jurisdiction? If so, what process is followed in this regard?

Israeli law recognises foreign trusts as a legal institution and generally gives effect to them under private international law and comity, particularly where the trust instrument contains an express governing law clause. There is no universal registration requirement for a foreign private trust merely because it relates to Israel. Recognition is context-specific.

For civil matters, Israeli courts will apply the chosen governing law to validity and internal administration, subject to mandatory Israeli rules (e.g., lex situs for Israeli immovables, public policy).

In proceedings, the foreign trust is proved by producing the trust deed and related documents, typically in notarised/apostilled form with certified Hebrew translations, and - where foreign law is material - supporting expert evidence.

For tax purposes, the Ordinance recognizes foreign trusts, including specific structures like Liechtenstein foundations and establishments, and foundations from the Bahamas, Panama, and the Netherlands Antilles. These are classified into defined categories (e.g., Foreign Resident /Beneficiary trusts and "Relatives' trusts") with distinct residency, sourcing, and reporting rules. Recognition commonly involves filing Israeli tax notifications and annual tax returns, appointing a representative, and providing trust documentation to the Israel Tax Authority; banks and other institutions will require AML/beneficial ownership disclosures.

Where a foreign trust holds Israeli real estate or securities, local registration, tax file openings, and transaction-specific filings apply, and Israeli law governs in rem aspects. Foreign testamentary trusts are also recognised; however, Israeli probate or succession orders are required to deal with Israeli assets, with will/trust validity assessed under the Succession Law's, 5725–1965 conflict rules.

Public or charitable activities carried out in Israel may trigger oversight and registration with the Registrar of Charitable Trusts, notwithstanding foreign governing law.

5.5 How are trusts created and administered in your jurisdiction?

Trusts in Israel are created and governed under the Trust Law, 5739–1979. A trust may be established in one of three ways: by law, by contract with a trustee, or by a deed of endowment ("Hekdesh"). A contractual trust may be created in writing, orally, or implicitly, without specific formalities, provided that the parties' intention to create a trust can be inferred from their conduct. A trust created by a Hekdesh deed requires execution by the settlor before an Israeli notary. A trust may also be established through a will, representing a unilateral and voluntary act by the settlor.

A trust is defined as a relationship under which a trustee holds or manages property for the benefit of a beneficiary or for another purpose. The trustee is responsible for managing the trust property, investing and distributing it in accordance with the trust's objectives. The trustee must act independently and is not bound by the wishes of the settlor or beneficiaries unless expressly stated in the trust instrument. In some trusts, a protector may be appointed to supervise the trustee's actions, approve certain decisions, or replace the trustee if necessary. The trustee must maintain proper accounts, provide annual reports to beneficiaries, and is prohibited from deriving personal benefit or engaging in conflicts of interest. A trust itself does not constitute a separate legal entity and is often administered through an underlying company.

5.6 What are the legal duties of trustees in your jurisdiction?

The Trust Law, 5739–1979 imposes strict fiduciary duties on trustees. A trustee must act in good faith, with loyalty, prudence, and the diligence of a reasonable person. The trustee must preserve, manage, and develop the trust property, act solely for the benefit of the beneficiaries or the trust's purpose, and avoid any conflict of interest. The trustee must maintain accurate records, prepare annual accounts, and provide beneficiaries with information and reports upon request.

The trustee is prohibited from purchasing trust property for personal benefit, profiting from trust transactions, or engaging in any act that creates a conflict between personal interests and fiduciary obligations. These duties are mandatory and cannot be waived by agreement. Breach of fiduciary duty may result in civil liability, removal of the trustee, or other remedies ordered by the court. Trustees are also subject to judicial oversight and may be required to obtain court approval for significant actions, particularly where the interests of beneficiaries may be affected.

5.7 What tax regime applies to trusts in your jurisdiction? What implications does this have for settlors, trustees and beneficiaries?

Israeli trusts are taxed under the Ordinance, which classifies trusts by residency of the settlors and/ or the beneficiaries of the trust and relationship between these parties to determine who is taxable, on what income, and when. Core categories include Israeli Resident trusts (generally taxed in Israel on worldwide income), Foreign Resident trusts (typically taxed only on Israeli-source income), Israeli Resident Beneficiary trusts and "relatives' trusts" (a special regime for foreign-resident settlors with Israeli-resident relatives as beneficiaries, subject to elections and conditions), Foreign Resident Beneficiary trusts (whereas the settlor of the trust is an Israeli resident and the beneficiaries are foreign residents) and Testamentary trusts. Classification hinges on the settlor's and beneficiaries' residency and, in some cases, the place of effective management. Reclassification can occur if residency or facts change.

For settlors, under certain limitations the regime may operate in a grantor-like manner (attribution of income to the settlor) or as a separate taxpayer at the trustee level, depending on the category. Contributions to a trust may have tax and reporting consequences (especially for Israeli assets, and in particular real estate in Israel); exemptions and deferrals are category- and asset-specific. A foreign settlor may secure Israeli tax limitation on non-Israeli income under qualifying foreign/relatives' trust rules; moving to Israel or adding Israeli beneficiaries can alter outcomes.

Trustees are generally the "assessable" person for Israeli purposes: they must register where required, file annual returns, maintain books, withhold tax on Israeli-source income and on taxable distributions, and appoint an Israeli tax representative if applicable. Banks will require AML/beneficial ownership documentation.

Beneficiaries may be taxed on distributions or on an attributed share of income, depending on classification and elections. Israeli-sourced income is typically taxable to Israeli residents; foreign taxes may be creditable subject to rules. Anti-avoidance measures (beneficial ownership, CFC/PFIC look-through, substance tests) and extensive reporting/withholding apply.

5.8 What reporting requirements apply to trusts in your jurisdiction?

Trust reporting in Israel is primarily tax-driven, supplemented by asset-specific filings and compliance with AML/beneficial ownership regimes. There is no general registry for private trusts, and they are not subject to supervision by a specific regulatory authority, other than the tax authorities on tax-related matters.

For tax purposes, trustees (or an appointed Israeli tax representative) typically opens a tax file with the Israel Tax Authority, notify the trust's classification (e.g., Israeli Resident, Foreign Resident, Relatives' or Testamentary, Etc.), and file annual returns with financial statements and beneficiary/settlor details. Elections (such as for a Relatives' trust) and material changes (e.g., settlor/beneficiary residency, protector/trustee changes, additions of assets or beneficiaries) should be notified. Trustees are responsible for maintaining proper books and underlying documentation.

Where trusts hold Israeli real estate or certain securities, transaction-specific reporting applies (e.g., land purchase/sale taxes, capital gains events, and withholding), often within statutory deadlines. Banks and other intermediaries require AML/KYC onboarding, including disclosure of the trust deed, trustees, settlors, beneficiaries, protectors, control mechanisms, and source of funds; certified translations and apostilles may be needed for foreign documents.

Israel implements FATCA/CRS. Financial institutions report accounts held by or for trusts; trustees must supply self-certifications and ownership/control information. If a trustee is itself a financial institution or the trust is treated as a reporting financial institution, additional due diligence and reporting obligations may arise under Israeli CRS/FATCA rules.

Public/charitable trusts must register with the Registrar of Charitable Trusts and submit annual activity and financial reports, audited accounts (where applicable), and governance disclosures. Noncompliance can trigger assessments, penalties, interest, enforcement actions, and banking restrictions. Trustees should monitor reclassification risks as residency or factual profiles evolve.

5.9 What best practices should be observed in relation to the creation and administration of trusts?

Establishing and managing trusts in Israel benefits from clear planning, robust governance, and disciplined compliance across tax, regulatory, and private international law dimensions.

Creation

Define the trust's purposes, classes of beneficiaries (including future beneficiaries), dispositive mechanics, and duration with precision. Include an express governing law and jurisdiction clause, and address conflict-of-laws for Israeli immovables (lex situs) and cross-border assets. Align the structure with Israel's tax classifications (Israeli resident, foreign resident, relatives', testamentary) and make required elections and notifications at inception. Observe asset-specific formalities (e.g., registration for Israeli real estate, transfer procedures for securities and bankable assets). Select experienced, conflict-free trustees; delineate powers and limits; consider a protector or investment committee with clearly defined consent and removal powers. Document settlor intent (e.g., a non-binding letter of wishes) and include spendthrift/protective provisions where appropriate. Anticipate family law interfaces (marital property claims, forced-heirship risks abroad).

Administration

Maintain strict segregation of trust assets and accounts, adopt written investment and distribution policies, and keep contemporaneous minutes, accounts, and valuations. Comply with Israeli tax registration, annual filings, and reporting; monitor reclassification triggers (changes in settlor/beneficiary residency, additions of assets, governance changes). Satisfy AML/KYC, beneficial ownership, and CRS/FATCA requirements with up-to-date documentation. For charitable/public activities, register and report to the Registrar of Charitable Trusts. Implement prudent delegation, conflict management, and indemnity frameworks consistent with fiduciary duties. Address data privacy, cybersecurity, and information rights of beneficiaries with clear protocols. Review the trust deed periodically and after life events or legal changes; consider court directions for ambiguities or material variations. For cross-border trusts, coordinate with foreign counsel to harmonize tax, reporting, and enforceability.

6 Trends and predictions

6.1 How would you describe the current private client landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

Israel's private client landscape is defined by cross‑border families, heightened regulatory scrutiny and professionalisation of family governance. Key trends include a strong focus on holistic planning, encompassing business succession, asset protection, and philanthropy, with underlying considerations for tax residency, comprehensive reporting, and demonstrating economic substance. Trusts remain a central tool for achieving these objectives.

A significant recent development is a bidirectional mobility trend, particularly intensified since October 7, 2023. Many Israeli high-net-worth individuals are exploring relocation and restructuring their Israeli assets to manage risk and reporting obligations, leading to increased use of holding companies and trust migrations. Conversely, many diaspora Jews, are considering moves to Israel, which triggers first‑time Israeli tax residency, requires onboarding with local banks, and necessitates rapid estate‑plan localisation.

Regulatory scrutiny is increasing. Financial institutions continue to tighten Anti-Money Laundering (AML) and Know Your Customer (KYC) procedures, with stringent requirements for identifying beneficial ownership and implementing a risk-based approach. Data flows from the Common Reporting Standard (CRS) and FATCA are fueling tax audits and trust reclassifications, especially for relatives' trusts and foreign-resident settlor trusts.

Israel has enacted a Voluntary Disclosure Program, which is applicable only through August 31st, 2026. Its main focus is to target individuals who failed to disclose their earnings from dealing in crypto-currencies, owners of foreign bank accounts and owners of real estate properties who failed to disclose their rental income.

Looking ahead, a notable legislative reform is the cancellation of the reporting exemption for Israeli residents for the first time and Senior Returning Residents arriving after January 1, 2026, though the 10-year tax exemption on foreign income remains. Over the next 12 months, we anticipate sustained enforcement of tax reporting (including CRS-driven inquiries), a continued focus on trust classification and attribution, and more complex cross-border probate planning. Practitioners are also giving greater attention to digital assets, cybersecurity, and bespoke strategies for families managing dual-direction mobility and multi-jurisdictional assets.

In Addition, the Government of Israel is looking to promote legislation which would allow for a tax exemption on Israeli sourced income applicable to Israeli residents for the first time and Senior returning residents. Under the proposal, Israeli residents for the first time and Senior Returning Residents shall enjoy an exemption on Israeli sourced income of up to 1,000,000 NIS per year for the first two years, and then a lower income threshold for an additional period of 3 years, all this while keeping the existing tax exemption on foreign-sourced income in place for the duration of 10 years.

7 Tips and traps

7.1 What are your top tips for effective private client wealth management in your jurisdiction and what potential sticking points would you highlight?

Effective private client wealth management in Israel requires a strategic approach, balancing holistic financial planning with strict regulatory compliance.

Top Tips for Planning:

• Integrated Wealth & Succession Strategy: Develop a comprehensive plan that aligns family values, business continuity, and asset protection across generations. This includes defining clear objectives for wealth transfer, addressing specific family needs (e.g., special needs children), and establishing robust governance structures to mitigate future disputes, while also considering the tax implications of such transfers.
• Proactive Multi-Jurisdictional Optimization: Given the prevalence of cross-border families and assets, ensure all planning instruments (wills, trusts, corporate structures) are harmonized across relevant jurisdictions. Coordinate with international advisors to optimize legal and tax efficiency, ensuring global enforceability and leveraging tax treaties where applicable.

Potential Sticking Points (Traps):

• Underestimating Regulatory Complexity: Overlooking the stringent AML/KYC requirements, beneficial ownership disclosures, and local licensing obligations for financial activities can lead to significant delays, penalties, or even criminal liability for clients and advisors.
• Inadequate Documentation & Governance: Failure to maintain disciplined reporting, contemporaneous minutes, and clear documentation for structures (especially trusts and family businesses) can lead to misclassification, loss of tax benefits (e.g., new immigrant exemptions), and increased vulnerability to challenges or audits.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.