Bach’s Double Violin Concerto was once played as a conversation between husband and wife, by two virtuosi, at a memorial service in Westminster Abbey for the late spouse of a prominent politician. A Tel Aviv Labor Court decision earlier this month suggested grounds for a similar musical parley between the National Insurance Institute and the Income Tax Authority – this time to the Beatles’ ‘Hello, Goodbye’.

The case would be of little interest here were it not for the hidden warning the judgement contained for some economic or ageing new immigrants whose attraction to Israel is not confined to a surge in Zionism, but includes elements of the tax benefits and other goodies the country has to offer.

As everyone by now knows, Israel grants a 10 year exemption from tax to new residents on foreign sourced income and capital gains. That, taken together with total absence of Inheritance or Estate Tax, access to Israel’s wonderful National Health System, and a climate that – on average – beats Miami and Bournemouth, smacks of the Garden of Eden. (It might be noted that the ‘real’ Garden of Eden was probably not in the Holy Land, but rather in that other Paradise Found – Iraq).

For the true immigrant the above is all true. For the economic immigrant, looking to put down just enough shallow roots to establish tax residency (and, thus, non-residency elsewhere) it isn’t quite so simple; and the same can be said for the ageing immigrant who wants to split their time between Israel and one or more other locations.

The Israel Tax Authority has little inherent objection to a questionable claim of residence – which should see the State’s coffers eventually turn a profit – but its officers are bound by myriad double taxation treaties that encourage it to draw an, albeit movable, line in the sand. In short, if someone wants proof of residence from the ITA, they need to make some sort of case, but nothing too grandiose. The National Insurance Institute, on the other hand, has no such interest. An Israeli resident pensioner is entitled to the national pension (not a fortune, but better than a slap on the belly with a wet fish), and – more importantly – access to the National Health System. Although, in many things, the NII follows the tax authority in its definitions, residence is not one of them. The definitions started out the same, but while tax law moved forward with the gradually (and then, not so gradually) industrializing young nation, the NII remained stuck in the orange groves. Thus, while the ITA generally wants Israeli residents, the NII is more picky.

Which brings us to the case at hand. An Israeli citizen living much of the time abroad went to court over the NII’s decision to cancel his residence and, thus, pension entitlement as well as access to the National Health System.

The individual, born in Hungary, married, begat children,  and divorced there before immigrating to Israel in 1979. He repeated the exercise here, and  – in the 8^th decade of his life –  he finally found happiness in the arms of a Hungarian woman, who he had the court believe, only wouldn’t  come to live in Israel because of her job. So, he spent the vast majority of his time, over several years, in Hungary. At the same time, he maintained a modest home in Israel, a bank account, a credit card and – much more soberly – invested time and money in maintaining the memory of his fallen soldier son . He told the court that the Hungarian woman cared for him, and gave evidence that he felt like he was living in Switzerland.

Now, that last piece of evidence alone might have led the judge to send him packing – feeling one is living in Switzerland is not a great advert for Israeli residence unless that feeling is being felt in the Galilee. But the judge – sitting in a Labor Court rather than a regular court where tax cases are heard – accepted his whole story hook, line and sinker, and – indeed – raked up something about moving with the times, old people no longer being stuck in one place.

At an emotional level, the case was heart-warming – the little guy, who had lost his beloved son in the service of his adopted country, represented by a legal aid lawyer because he couldn’t cover the costs himself, prevailing against Big Brother.  However, for a rational tax accountant like me, the decision was a bit mind boggling, and I would have thought it has a good chance of being overturned on appeal.  

There was, however, a very important lesson in the case. The judge stressed that – if someone were already an Israeli resident, the onus of proof was on the NII to prove they were no longer resident; if they were previously not resident, the onus of proof that they were now resident was on the individual.

Golden age and economic immigrants, looking to split their time between Israel and other locations, but wanting to maintain their access to ‘free’ health care, need to keep a careful eye on their residence status for both income tax and national insurance purposes – the judge is not likely to be as sympathetic the next time.