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            Individual’s Residence (March 1st, 2008)

            1.Factual Background

            1.1"A”is an Israeli born individual holding both Israeli and British citizenships and who thirty years ago gave up his Israeli residence and moved to England.

            1.2"A”has three children who live in the United States. "A” owns apartments in New-York City, in Israel and a hotel apartment in England.

            1.3"A”’s U.S. legal advisers advised that "A” will not be regarded as resident of the United States in one of the following cases: (i) in case he does not sojourn in the United States for more than 120 days, during the tax year; (ii) in case he sojourns in the United States more than 120 days during the tax year, but less than 183 days in that year provided he enjoys a "closer connection” to another country.

            1.4"A”declared that he enjoyed a "closer connection” to England, but over the years realized most of his English assets and investments and his English advisers are of the opinion that he does not enjoy close enough ties with England.

            1.5"A”is a beneficiary of a trust, which owns off shore corporations engaged in financial investments.

            1.6During the course of 2008, "A” and his spouse spent 142 days in Israel and they intend to spend such time in Israel during the coming tax years. "A” speaks fluent Hebrew and has social contacts in Israel.

            2.Question Posed

            The opinion examined whether "A”’s presence in Israel would constitute the sufficient tie in order not to be a tax resident of the United States despite "A”’s presence in the United States of over 120 days but less than 183 days during the tax year. The opinion also examined whether "A” was a tax resident of Israel as defined in section 1 of the Israeli Income Tax Ordinance and what tax consequences would evolve from "A”’s sojourn in Israel including the Ordinance’s provisions regarding trusts and those which come into force as a result of Amendment 168 granting tax benefits to new immigrants and returning veteran residents.


            3.1The opinion examined the U.S. tax law and its criteria of tax residence of individuals, stressing that the final determination should be left to a U.S. expert. Should "A” be able to prove sufficiently close ties with Israel, his non U.S. sourced income will go untaxed from the US perspective.

            3.2Due to the fact that the arithmetic presumption of residence laid down by the Israeli Income Tax Ordinance in its definition of "Resident” was not met by "A”, and in view of the circumstances described above, it will be difficult for "A” or the Israeli Tax Authorities to establish or conclude that "A”’s closer connection lies with Israel or that he is resident therein. In such a case "A” will be a non-resident from the Israeli perspective and liable for Israeli taxes only on Israeli sourced income.

            3.3Should "A” desire to be regarded a "Veteran Returning Resident”, it might be possible to regard him as an Israeli resident in view of his choice of "center of interests” stressing the subjective element with respect thereto as opposed to other parameters which do not lead to the same conclusion. In such circumstances, "A” might be able to avail himself of the benefits of the United States – Israel DTT. The opinion includes recommendations to assist "A” in assuming Israeli tax residence as a conduit to "closer ties”.

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