Executive Summary

On December 4, 2025, 26 jurisdictions (including the UK, France, Germany, and Italy) issued a Joint Statement declaring their intention to adopt the OECD's IPI MCAA (Multilateral Competent Authority Agreement on the Exchange of Readily Available Information on Immovable Property). This move marks a paradigm shift from an "Exchange on Request" regime to an Automatic Exchange of Information (AEOI) regime regarding real estate assets.

This memorandum reviews the new mechanism, the expected timelines, and the legal and tax implications for individuals and trusts holding real estate outside their country of residence.
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1. The Normative Background: Closing the Regulatory Gap

Over the last decade, the fight against black capital has focused primarily on financial assets through the implementation of the CRS (Common Reporting Standard). While the banking system has become almost completely transparent to tax authorities, real estate assets (Non-Financial Assets) remained under an outdated reporting regime based on "Exchange on Request" (EOIR). This created an incentive for capital diversion from financial assets to real estate (Asset Substitution).

The current statement constitutes the operational phase of the process initiated by the OECD's report to the G20 in July 2023 (Enhancing International Tax Transparency on Real Estate), aiming to create global standardization in real estate reporting.
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2. The New Mechanism: From "On Request" to "Readily Available"

The IPI MCAA is based on the principle of exchanging Readily Available Information. This means countries will automatically transfer information existing in government databases (land registries and tax authorities) without the need for a specific request or prior reasonable suspicion.

The mechanism operates through two modules that countries can sign up for:

• Ownership/Holdings Module: Reporting on the existing stock of assets and on new acquisitions.
• Income Module: Reporting on recurrent income (rental) and capital events (disposals/capital gains).
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3. Substantive Issues and Risk Analysis

An analysis of the technical Framework documents (October 2025) reveals several critical points requiring preparation by taxpayers:

A. Retroactive Application ("The Stock Take")
Unlike many tax agreements that apply prospectively (Grandfathering), the IPI mechanism includes an explicit provision for a one-off exchange of information on the existing stock of real estate holdings.

• Legal Implication: Upon the agreement's entry into force (expected by 2029-2030), information regarding assets acquired in the past will be transferred, even if purchased a decade or more ago. There is no "statute of limitations" on the ownership itself.
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B. Cross-Referencing with DPI (Digital Platforms Reporting Rules)
The IPI does not operate in a vacuum but complements the DPI (Digital Platforms Initiative) rules already implemented in many countries (such as DAC7 in the EU).

• Implication: Tax authorities will possess the capability to cross-reference two independent information sources:
  1. Income reports from digital platforms (Airbnb/Booking).
  2. Asset reports from land registries.
  • Risk: Discrepancies between reports (e.g., reporting income without a registered asset in the taxpayer's file) are expected to trigger automatic audit proceedings.
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C. Identification Challenges and Matching Algorithms
The OECD acknowledges that many land registries do not include the owner's Tax Identification Number (TIN), but only basic details (name and address). Consequently, tax authorities are expected to use probabilistic matching algorithms (Fuzzy Matching) to link assets to taxpayers.

• Risk: Exposure to erroneous tax audits based on identification errors ("False Positives"), shifting the burden of proof to the taxpayer to refute ownership.
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D. The Gap Between Legal and Beneficial Ownership (UBO)
At this stage, the information transferred is based on existing registration ("As Is"), which typically reflects the Legal Owner and not necessarily the Ultimate Beneficial Owner (UBO). However, the regulatory trend (such as the BORIS project in Europe) is towards linking and synchronizing land registries with UBO registers, which will eventually lead to full transparency even for holding structures via legal entities.

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A new legislative memorandum regarding tax residency, published recently by the Ministry of Finance, proposes a paradigm shift that could fundamentally alter the lives of thousands of Israelis and expats. Whether you are a family planning relocation, a businessperson with international operations, or a high-net-worth individual splitting time between countries, the rules of the game are about to change.

For decades, the Israeli tax system has relied on the "Center of Life" test—a subjective, flexible standard based on family ties, economic interests, and physical presence. The new proposal seeks to replace this flexibility with rigid mathematical formulas and "Conclusive Presumptions" that cannot be challenged in court.

Here is an in-depth analysis of the proposed changes and their practical implications.

The Current Situation: The "Center of Life" Test

Under current law, residency is determined by the "Center of Life" test. While there are numerical presumptions (such as the 183-day rule), they are currently rebuttable. This means a taxpayer can prove that despite spending time in Israel, their center of life is elsewhere—or conversely, the Tax Authority can argue that someone is a resident even if they spent fewer days in the country.

The Revolution: Conclusive Presumptions

The memorandum proposes a dramatic departure: the total abolition of rebuttable presumptions. In their place, the state introduces Conclusive Presumptions. Once a taxpayer meets the mathematical criteria set in the law, they will be deemed an Israeli resident (or a foreign resident) regardless of their subjective intent or where their actual "center of life" may be.
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New Conclusive Presumptions for Israeli Residency
An individual will be deemed an Israeli resident if they meet one of the following tracks:

1. The Standard Track: Stayed in Israel 75 days or more in the tax year AND has an accumulated score of 183 weighted days (see calculation below) in one of the relevant three-year periods.
2. The Spouse Track: Stayed in Israel 30 days or more in the tax year, their spouse is an Israeli resident under these rules, AND has an accumulated score of 140 weighted days in one of the relevant three-year periods.
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New Conclusive Presumptions for Foreign Residency
An individual will be deemed a Foreign Resident if:

1. Individual: Stayed in Israel 74 days or less in the tax year AND has a maximum of 110 weighted days in each of the relevant three-year periods.
2. Couple: Both spouses stayed in Israel 90 days or less in the tax year AND each has a maximum of 125 weighted days in each of the relevant three-year periods.

You see a "fixer-upper" with potential. The architect sees a blank canvas. But the Israel Tax Authority? They just see a pile of bricks—and that distinction could cost you hundreds of thousands of shekels.
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In Israeli real estate taxation, the definition of a "Residential Apartment" (Dirat Megurim) is the golden ticket. It grants you lower Purchase Tax brackets (or exemptions for single homes) and significant exemptions from Appreciation Tax (Mas Shevach) upon sale.
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However, a series of recent court rulings in 2025 has sharpened the guillotine. It is no longer enough for a property to be zoned for residence or for you to intend to live there. If the property fails the "Physical Test"—specifically, if it lacks basic facilities like a kitchen or a toilet at the moment of sale—you are walking into a tax trap.
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Here is what three recent District Court rulings teach us about the gap between a "house" and a "taxable home."
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1. The "Shell" Trap: No Kitchen, No Discount (Krasni Case)

In the case of Krasni v. Director of Real Estate Taxation (Appeal 39040-09-22, March 2025), the buyer purchased a luxury "Shell Apartment" (Dirat Ma'atefet) from a developer in Jaffa.

The Scenario: The contract explicitly stated the apartment was a "shell"—concrete walls, no flooring, no kitchen, no bathrooms, and no internal partitions. The buyer argued that since it was zoned for residence and he intended to finish it and live there, he should pay the reduced Purchase Tax applicable to a single residential apartment.

The Verdict: The court rejected the appeal. Judge Kirsch and the committee ruled that the test is objective, not subjective.

• The Logic: A concrete box without a shower, toilet, or kitchen cannot be used for living today. Therefore, it is not a "Residential Apartment"; it is "Other Real Estate Rights" (like a plot of land), taxed at a flat, higher rate (currently 6%).
• The Lesson: Potential doesn't count. If you buy a shell to customize it yourself, be prepared to pay higher taxes than if the developer had installed a basic kitchen before handing over the keys.
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2. The "Ruins" Trap: Potential is Irrelevant (Orion Case)

If Krasni dealt with a new apartment, the Orion v. Director of Real Estate Taxation case (Appeal 10100-07-22, March 2025) dealt with an old one.

The Scenario: A receiver sold a property in the desirable Neve Tzedek neighborhood. The structure had been neglected for years, disconnected from water and electricity meters, and stripped of sanitary fittings. The seller claimed the "Appreciation Tax Exemption" for a residential apartment.

The Verdict: The exemption was denied. The court ruled that a property that has been physically severed from utility infrastructure and lacks basic sanitary facilities ceases to be a "Residential Apartment" for tax purposes.

• The Logic: The court applied the "Physical Test" rigorously. Even though the property was in a residential neighborhood and had been a home in the past, its current physical state—a "ruin"—disqualified it.
• The Lesson: If you are selling a dilapidated property, "fix it up" before the sale. Reconnecting water and installing a basic toilet could save you a fortune in Appreciation Tax.
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3. The "Force Majeure" Defense (Eisler Case)

While the courts are strict on physical condition, they showed surprising flexibility regarding timelines in the case of Eisler v. Director of Real Estate Taxation (Appeal 22899-10-22, May 2025).

The Scenario: A new immigrant (Olah) purchased an apartment "on paper." To qualify for the reduced Purchase Tax benefit for immigrants, the law generally requires moving into the property within a specific timeframe. However, due to contractor delays and COVID-19 travel restrictions, she received the key and moved in more than three years later—well past the statutory deadline. The Tax Authority tried to revoke her benefit.

The Verdict: The court ruled in favor of the immigrant. Judge Dorot applied a "purposive interpretation."

• The Logic: The delay was not the taxpayer's fault. Since she made every effort to move to Israel and the delay was caused by the contractor and the pandemic, penalizing her would defeat the legislative purpose of encouraging Aliyah.
• The Lesson: While physical definitions are rigid, timelines can be flexible if you can prove "Force Majeure" or circumstances beyond your control.

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Amendment 277 to the Income Tax Ordinance, which came into effect in January 2025, introduces a comprehensive reform in the taxation of "Closely Held Companies" (Hevrat Meatim). The reform fundamentally alters the taxation of controlling shareholders' income, regulates payments between related companies, and establishes a new mechanism for taxing undistributed profits.
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For foreign investors and residents holding Israeli companies, this reform is critical. It shifts the Israeli tax regime from a passive approach regarding trapped profits to an active, penalty-based regime, potentially triggering new tax liabilities on accumulated capital.

For High-Net-Worth Individuals in New York City, the fiscal landscape is shifting. The recent election of Mayor Zohran Mamdani, with a platform focused on increasing tax burdens for high earners, has accelerated strategic discussions regarding relocation. With New York already ranking 50th in the Tax Foundation’s 2026 State Tax Competitiveness Index, the financial incentives to relocate to Israel—making Aliyah—have become increasingly compelling.
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However, while the political and economic climate provides the motivation to leave, the legal reality presents significant complexities. Relocating is not merely a logistical matter of moving assets; it is a legal process of severing tax residency. This process involves navigating two distinct regulatory environments: the New York State Department of Taxation and Finance and the Internal Revenue Service (IRS).
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This article outlines the critical legal tests for severing New York domicile and the federal tax implications of expatriation.
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Establishing Domicile: The Legal Standard of Intent

The primary challenge in severing ties with New York is the concept of "Domicile." Unlike statutory residency, which is based on day counts, domicile is defined by the taxpayer's intent to make a place their permanent home. To successfully change domicile to Israel, a taxpayer must demonstrate by "clear and convincing evidence" that their center of gravity has shifted.

The Israeli tax system is based on the principle of two-stage taxation forcompanies. In this framework, corporate tax is imposed on company profits inthe first stage, and in the second stage, tax is levied on dividendsdistributed to shareholders. The purpose of this mechanism is to create taxequivalence between individual activity and activity through a company, whileproviding an incentive for companies to invest their profits for growth andbusiness development.

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