The nomad builder: working from abroad, and when Israel really stops being the tax home

First, some reassurance: two months from Lisbon changes nothing

Let us start with the answer that rescues most advisory calls on this subject: if you are an Israeli resident who goes to work two months from Lisbon, three from Chiang Mai or a whole winter from the Canary Islands, nothing changes about your tax. You are still an Israeli resident, and Israel taxes its residents on a worldwide basis: all income, from every source, from anywhere in the world, is reported and taxed here as usual. Your osek stays open, the tax advances keep running, the annual report is filed, and the fact that the code was written facing a different view does not interest the assessing officer in the slightest.

Expenses too are handled under the ordinary rules: receipts collected abroad are kept and treated exactly as they would be in Israel, part recognized and part not, under the same principles set out in the recognized expenses guide. (No, a month in a co-working space in Bali is not automatically a "business holiday", but the co-working fees themselves are a different story.) And if the clients pay you in dollars or euros, that was already true when you worked from the living room. The foreign currency guide sorts out that side.

So why write a guide at all? Because between "a light nomad" and "genuinely leaving" stretches a grey area full of self-assured posts and advice from friends. From here on, the following chapters.

When it does become a story: centre of life and the day presumptions

Tax residency in Israel is not determined by a feeling and not by passport stamps. It is determined by the centre of life test: where the permanent home is, where the family is, where the economic ties are (a business, accounts, assets) and where the social ties are. The day count serves as an auxiliary set of presumptions:

• The 183 day presumption: someone who stayed in Israel 183 days or more in a tax year is presumed to be an Israeli resident in that year.
• The 30 plus 425 presumption: someone who stayed in Israel 30 days or more in the tax year, and whose total stay in Israel in that year and the two preceding it comes to 425 days or more, is also covered by the residency presumption.

Note the wording: presumptions, not decrees of fate. They are rebuttable in both directions, and the substantive test that decides is always the centre of life. You can spend few days in Israel and still be considered a resident (the home, the family and the business are here), and theoretically the opposite is possible too. This is why "I counted days in a spreadsheet" is the beginning of an analysis, not the end of one.

A real severance of residency: the process, Form 1348 and National Insurance separately

Severing residency is not a declaration in a story and not a form you fill in at the airport. It is a process, usually running over several years, of actually moving the centre of life: a new permanent home abroad (and leaving the home in Israel), the family moves, the economic activity moves, the social ties are built there and dismantled here. The Tax Authority looks at the whole picture over time, which is why the transition year itself is usually a "mixed" year requiring careful handling.

On the filing side: someone who files a report in Israel and holds the position that they are no longer a resident attaches Form 1348, a residency declaration in which the days and the ties are set out and the position is reasoned. That is the document in which "I am no longer a resident" turns from a feeling into an orderly position that can be defended.

And now the part most nomads miss: National Insurance is severed separately. Residency for the purposes of the National Insurance Institute is examined on a track of its own, with a dedicated form (a questionnaire for determining residency for someone staying abroad) and a separate decision. Until the severance is recognized you are residents liable for contributions, including on income from abroad. On the other hand, severance from National Insurance also ends health coverage in Israel. It is a decision with two sides, not only a saving.

In practice people sometimes also speak of an "adjustment year", an interim period in which the status is not yet unambiguous either way. There is no automatic magic formula here: these are situations examined on their own facts, which is exactly why the year or two around the move is worth close accompaniment.

The exit tax, Section 100A: the boss at the end of the maze

Made it this far with a serious relocation plan? Meet the section that changes the whole picture for founders: Section 100A of the Income Tax Ordinance, the exit tax. The idea is simple and far reaching: on the day a person ceases to be an Israeli resident, their assets are treated as if they had been sold on the eve of the severance. The capital gain accrued up to that day, the rise in value since acquisition, belongs to Israeli taxation, even if the real sale happens years later, in another country.

And what counts as "assets"? Among other things, your shares in the startup. Yes, even when they are not tradable, even when you have not seen a shekel from them: if the company is worth something on the severance date, a paper gain has accrued there, and the exit tax looks at it. The law allows you not to pay immediately but to defer payment to the date of actual realization (with a mechanism for apportioning between the periods), but deferral is not deletion: the liability travels with you, and it demands an orderly position and documentation of the value at the date of departure.

This is why a founder with shares that are worth something does not "move to Portugal" lightly. The post on Twitter tells you about the weather and the low taxes; it does not tell you about a valuation of the company at the severance date, about the future settlement with the Israeli Tax Authority at the time of the exit, and about the small print of the benefit regimes for foreigners in the destination countries.

And the company? Control and management

So far we have talked about you. But if you have a company, it has a residency of its own, and it does not automatically move house with you. A company is considered an Israeli resident if it was incorporated in Israel or if control and management of its business are exercised from Israel. This test works in both directions, and both are relevant to nomads:

• An Israeli company managed from abroad: you moved to Barcelona and carry on managing the Israeli company from the beach? It probably remains an Israeli resident (it was incorporated here), but now your new country of residence also enters the picture, and it may argue that the company is managed there and liable there. Dual residency of a company is exactly the kind of pain you want to prevent in advance rather than untangle after the fact.
• A foreign entity managed from a living room in Tel Aviv: the opposite direction, and mistakenly the popular one. A Delaware LLC or a Cyprus company "managed" entirely from Israel may be considered an Israeli resident through the control and management test, and then the foreign structure has added bureaucracy without moving the tax at all. We expanded on this in the Delaware guide for Israelis.

The conclusion for anyone who has a company: your relocation is also an event of the company. Sometimes the solution is actually transferring the management, sometimes a change of structure such as a flip to Delaware, and sometimes leaving everything exactly as it is. But the decision is made with the numbers on the table, just as with the decision whether to incorporate in the first place.

Practice for a nomad: documents, treaties and the summary table

A few tools worth knowing in any nomad scenario:

• Tax treaties and the foreign tax credit. Israel has a broad network of treaties for the prevention of double taxation. They set "tie breakers" for cases of dual residency, and the credit mechanism prevents, in most cases, paying tax twice on the same income: tax paid abroad is recognized as a credit against the tax in Israel under the rules. Full double taxation is rare; double filing, on the other hand, is common.
• Documentation, documentation, documentation. Flight tickets and day counts, rental contracts (in Israel and abroad), the children's school documents, insurance, accounts. These are the evidence that builds or contradicts residency. A serious nomad keeps one orderly folder, and it will serve you one day facing a capital declaration too.
• VAT is a separate axis. Where the clients are and what you issue them, including zero-rate VAT on exported services, carries on under the VAT rules, regardless of the question of your residency. Two axes, two sets of rules.

And to close, the whole map in one table:

And when is it essential to talk to us? Before a relocation, not after, while it is still possible to time, to document and to choose a route. If you are at the stage between "dreaming" and "looking for an apartment abroad", send us a message. We will map together where you sit on this table and what really needs handling.