Tax ruling for returning residents

The Israel Tax Authority published recently a tax ruling, number 2597/13, that deals with tax breaks to new immigrants and returning residents.

 For more details, see: Summary of tax benefits to new immigrants and returning residents.
 See also: Update on Israeli Tax Benefits for Returning Residents and New Immigrants

The facts

The taxpayer left Israel with his family in 1997 and became a resident in a country that has a tax treaty with Israel. In 2010, the taxpayer started to work in Israel, but decided to become a resident two year late. In 2009, the taxpayer’s employer granted him stock options. The start of the option vesting period was backdated to 2007.

The taxpayer request

The taxpayer requested from the Israel Tax Authority a tax ruling on a certain issues, as follows:

(1) When did the taxpayer become fiscally resident in Israel?

(2) Could the taxpayer request an extension of the 90-day deadline period after arrival in Israel?

(3) Are the gains from the sale of the stock option taxable? 

The tax ruling

The Israel Tax Authority ruled as follows:

(1) The taxpayer is an Israeli resident entitled to tax breaks to new immigrants and returning residents from the moment he arrived in Israel.

(2) The taxpayer could not be granted the extension since the election wasn’t filed within the 90-day deadline after arrival in Israel.

(3) If the options vested in the taxpayer before the arrival to Israel, they are exempt from Israeli tax