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Taxation of a Trust in Israel: “Foreign Resident Trust” (“FRT”)

In accordance with section 75I of the Ordinance (former FRST). The definition of FRT is of a trust in which during the tax year:


(1) all its Settlors and Beneficiaries are foreign residents; or (2) a trust in which all Settlors are foreign residents and all Beneficiaries are Beneficiaries for public purposes and there were no Israeli resident Beneficiaries from its establishment day; or (3) a trust in which all of its Settlors have passed away and all the Beneficiaries during the tax year are Beneficiaries for public purposes or foreign residents, and there were no Israeli resident Beneficiaries from its establishment day. As such, the FRT is considered as foreign resident for Israeli tax purposes and shall not be subject to Israeli taxation, unless it holds assets and/or incomes in Israel.

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