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:
[icon type=”icon-caret-right”] No tax on non-Israeli source income
[icon type=”icon-caret-right”] No tax on most Israeli source investment income
[icon type=”icon-caret-right”] No estate/inheritance tax on investments in the US, UK, etc.
[icon type=”icon-caret-right”] No need to report foreign source income
[icon type=”icon-caret-right”] Israeli resident underlying company – potential access to Israel‘s tax treaties with over 40 countries
[icon type=”icon-caret-right”] Not on blacklists
[icon type=”icon-caret-right”] No Israeli exchange control
[icon type=”icon-caret-right”] Anti-money laundering rules usually not intrusive
[icon type=”icon-caret-right”] Confidentiality
[icon type=”icon-caret-right”] Asset protection
[icon type=”icon-caret-right”] Orderly framework for personal finances
[icon type=”icon-caret-right”] Facilitates gradual transfer of wealth to the next generation in Israel or elsewhere
Israeli residents may benefit from a TOV as follows:
[icon type=”icon-caret-right”] No tax on non-Israeli source income
[icon type=”icon-caret-right”] No estate/inheritance tax on investments in the US, UK, etc.
[icon type=”icon-caret-right”] Improved foreign tax credit eligibility
[icon type=”icon-caret-right”] confidentiality
[icon type=”icon-caret-right”] Asset protection
[icon type=”icon-caret-right”] Orderly framework for personal finances
[icon type=”icon-caret-right”] 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