ByMarcus Dysch, Marcus Dysch
British Jews who make aliyah to Israel face continued confusion over their tax status, according to a pensioner involved in a long-running financial dispute.
Paul Weiser, 78, moved to Israel in 2010 and has since been in conflict with both countries over his tax status under double taxation rules.
He took the British government to a tribunal over the issue but lost, with Judge Roger Berner concluding that he was not entitled to claim exemption from paying British tax on his pension under joint British-Israeli rules.
New olim enjoy a ten-year exemption window during which they are not required by the Israeli government to pay tax on any foreign-source income such as their pension or housing rental. The tax break provides an obvious attraction for UK Jews moving to Israel.
But their exact status has been unclear for some time – until now. The tribunal ruling against Mr Weiser should act as clarification, although he intends to appeal.
Mr Weiser believes the position is illegal, lacks transparency, and claims that diplomatic disputes between Britain and Israel could be to blame.
He said: “Everyone seems to agree that the situation is flawed, but no one is keen to say so due to political standpoints.
"So we continue to suffer, while immigrants [to Israel] from every other EU country, all the Commonwealth, all of South America, Russia, Ukraine and more, all fully enjoy the tax-free period.”
HM Revenue and Customs advises potential emigrants that if they move to Israel and pay Israeli tax then no additional payments will be due on British pensions.
But in the cases of olim who are keen to enjoy the ten-year exemption and pay no Israeli tax, the British government continues to deduct tax at source on British-based annuities and pensions claimed after moving to Israel.
Israeli media have speculated that the reluctance of both governments to resolve the dispute is due to British disapproval of Israel’s settlement policies.
Last year the Israel Tax Authority told the Jerusalem Post that a new treaty favouring British olim had been agreed in 2009, but that the British government was refusing to ratify it. The UK denied the treaty even existed and claimed that talks were still ongoing.
Ex-pats moving to places in the West Bank such as Ariel and Efrat pose a particular problem, as the British government states the settlements are illegal. HMRC officials clearly feel it is impossible to have British pensioners paying taxes from those areas.
Mr Weiser worked for a decade as an administrative officer at the Israeli embassy in London. He and his Israeli wife moved from their home in Kenton, north west London, to Herzliya Pituach in March 2010, to be nearer their two daughters who live in Israel.
“I decided that when I retired we would move to Israel. I contacted HMRC and they advised me to read a document on the double tax agreement. It states that pensions are exempt if you are subject to Israeli tax,” he said.
Mr Weiser has until September 28 to file his appeal. He said fighting the matter was “a matter of principle. HMRC are misleading the public and the Israeli tax authorities do not even know their own rules”.