Your Taxes: TOV‘s (Trust Owned Vehicles)

Your Taxes: TOV‘s (Trust Owned Vehicles)

A TOV is a trust that owns an ‘‘underlying company‘‘, which in turn does business and/or holds investments around the world.

A TOV may enjoy a complete exemption from Israeli tax on:

1. Non-Israeli source income and gains: if the TOV is established by or for the benefit of non-Israeli residents. Furthermore, there is no Israeli tax reporting requirement.

2. Israeli source income and gains: Israeli publicly traded bond interest, interest on foreign currency deposits at an Israeli bank (PATACH) and capital gains on Israeli corporate securities.

Most other types of Israeli source income will be taxable in Israel at rates ranging from 20% to 46%.

The TOV first became possible when an amendment to the Income Tax Ordinance was Implemented in Israel on January 1, 2006.

Israel recognizes the trust concept and the Trust Law, 1979, largely applies common law principles.
The trustee may be Israeli resident without affecting the Israeli tax exemptions available to the TOV.

There are no Israeli exchange control restrictions as Israel abolished exchange control in 1998.

Who Does a Trust Owned Vehicle (TOV) benefit?

A Trust Owned Vehicle (TOV) may be beneficial to almost anyone, wherever they reside.

Non-Israeli residents may benefit from a TOV as follows:

   No tax on non-Israeli source income
   No tax on most Israeli source investment income
   No estate/inheritance tax on investments in the US, UK, etc.
   No need to report foreign source income
  Israeli resident underlying company – potential access to Israel‘s tax treaties with over 40 countries
   Not on blacklists
  No Israeli exchange control
   Anti-money laundering rules usually not intrusive
   Confidentiality
   Asset protection
  Orderly framework for personal finances
   Facilitates gradual transfer of wealth to the next generation in Israel or elsewhere

Israeli residents may benefit from a TOV as follows:
   No tax on non-Israeli source income
   No estate/inheritance tax on investments in the US, UK, etc.
   Improved foreign tax credit eligibility
   confidentiality
   Asset protection
   Orderly framework for personal finances
   Facilitates gradual transfer of wealth to the next generation in Israel or elsewhere

Professional advisors in each country concerned should review the pros and cons

December 10, 2013

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