Israeli Tax Alerts | Practical Interpretations | 2008-2020

42 basis, the relevance of these benefits diminish greatly (the same applies to immigrants from the USA, who despite severing their American residencies, remain subject to tax on a worldwide basis in the USA based on their citizenship). Section B4 of the French tax code (CGI) states that an expatriate individual will remain a tax resident of France if one of the following applies to him: (1) his primary home is in France (similar to the permanent home test); or (2) he performs work or grants independent services in France (unless this activity is only concomitant); or (3) the center of his economic interests is in France (this test is usually fulfilled if most of his incomes are generated in France); or (4) he stays in France for 183 days or more in the tax year. In June 2015, France’s supreme administrative court (the Conseil d’Etat) ruled concerning an individual who had moved to Cambodia (he worked there voluntarily and maintained his tax domicile there), but his sole income was a French sourced pension, that his economic interests were centered in France and he therefore remained a France resident under domestic law. In this case, the individual requested to continue to be considered a France resident, due to the fact that the pension that he received from France was subject to withholding tax applying to foreign residents, which was greater than the tax burden that the individual would have paid had he been considered a France resident. The tax authorities argued that a French sourced pension was not enough for the individual to be considered a France resident, inter alia based on the explanation that his pension did not constitute compensation generated from economic activity that was carried out in France. Two judicial instances (the Administrative Court and the Appellate Administrative Court) supported the position of the tax authorities, but as noted, the supreme instance ruled otherwise. We should note that Cambodia and France do not have a Tax Treaty between them. The implementation of the tiebreakers of a commonly worded tax treaty (such as the OECD model convention) would have probably led to the decision that the individual was not a resident of France. It would seem that when implementing tiebreaker tests according to the provisions of the treaty between Israel and France for a qualified individual from France in a case similar to that described above, Israeli residency should be determined. However, Israeli individuals who have qualified individual status, and therefore are exempt from tax on incomes generated abroad, may have difficulty concerning eligibility for treaty benefits. This is due to the definition of the term “resident of a contracting state” in the OECD model convention and in most treaties that Israel has signed, whereby this term does not include a person (in our case, the qualified individual) who is subject to tax in that country (Israel) only concerning income sourced in or capital located in that country (Israel). This makes it