According to the Section 75J of the Ordinance, the Foreign Resident Beneficiary Trust is a trust in which (1) the provisions of section 75G (a)(1) are not met (not a IRT) and (2) it is not a Testamentary Trust and (3) all following conditions are met during the tax year:

1. It is an "irrevocable trust" as defined in Section 75C of the Ordinance.

2. All its beneficiaries are foreign individuals, whose identities are known.

3. At least one of its settlors is a resident of Israel.

4. If the above three conditions were met at the time of its creation, following conditions also should be met -

   1. The trust documents explicitly state that a tax resident of Israel shall not be added as beneficiary to the trust.

   2. In a declaration submitted by the settlor under section 75P1 is declared, that the trust does not add and shall not add Israeli resident beneficiaries, or Israeli resident beneficiaries that their eligibility for the trust is conditional on their cessation of being an Israeli resident.

Once all mentioned conditions of the definition "Foreign Resident Beneficiary Trust" are met, Section 75J(b) of the Ordinance provides that the income and the assets of the trust shall be treated as the income and the assets of the beneficiary.

Section 75J(c) states that a FRBT shall be considered as a foreign resident, and accordingly the assets of such trust shall be deemed as being held by an individual foreign resident, and its income as an the income of an individual foreign resident. Therefore, foreign incomes and assets of the foreign beneficiary basically are not subject to Israeli taxation.

However, the transfer of assets to the trustee in the trust should be taxed as if it would have been taxed while transferred directly from the settlor to the foreign resident beneficiary.