Israeli Tax Alerts | Practical Interpretations | 2008-2020

190 the reports and notices set forth above, both by the settlor and by the trustee in a trust that has become “reportable” upon the immigration of the settlor to Israel as described above. In addition, we stand behind our position that the purpose of the trusts chapter's legislation in the ITO was to eliminate the tax advantage for holding assets through a trust compared to directly holding the assets and to create tax neutrality, to the extent possible, between the two situations. It is our position that there was no intent of worsening the situation of the tax payer only due to the fact that his assets are held by a trustee. And indeed, if the new immigrant were to hold his assets overseas directly or transfer them to his children (the beneficiaries of the trust) directly, there would be no reporting liability concerning them upon his immigration to Israel. Moreover, even if the trust were classified as an Israeli Residents Trust upon the immigration of its settlor to Israel, the trustee would still be exempt from the duty of submitting reports and notices during the dispensation period (lasting 10 years), let alone, the legal situation should be such with respect to a Foreign Resident Beneficiary Trust too. Our conclusion in the context of the example that was given is that the duty to submit notices as set forth above by a trustee exists only in the first tax year after the end of the ten year benefits period starting from the time of immigration of the settlor to Israel. (January 2015) addendum to trust execution instruction Recently, the Israeli Tax Authority ( "ITA" ) has published an addendum to execution instruction 1/2010 concerning trusts (hereinafter: "the Addendum" ), in view of recent changes in legislation that had entered into force primarily in the 2014 tax year and further to forms and various notices, that the ITA has published since the announcement of the legislation. We wish to inform you of a number of interesting comments from the addendum. We should mention that in view of the legislative changes, changes were made in certain fields in the individual's annual tax return for 2013, including the duty of a beneficiary to report a distribution that he has received from a trust in the tax year and the amount thereof. 1. The Tax Authority is refreshing its position whereby a trustee in a “foreign” trust (a trust which considered as a foreign individual), which derives income or has an asset in Israel (thus has allegedly a duty to submit an annual tax return in Israel), will be entitled to the provisions regarding exemption for submitting tax returns applying to foreign resident (regulation no. 5 to the regulations regarding exemption from submitting annual tax return). According to that regulation, the exemption from