From the president

Dear colleagues,

In the past, before the enactment of the trusteeship chapter in the Israeli Income Tax Ordinance, a chapter that was a welcome (and necessary) amendment, there were “dreams” of turning Israel into a trustees’ paradise – a goal that was one of the overt catalysts for the above legislation and its purposes.

For decades there have been many examples of this around the world, in which a country that can provide legal and taxation stability, economic stability and excellent financial services can generate a broad platform of financial services that will provide livelihoods for many of its citizens and contribute significantly to its economy. In effect, this is an export industry for all intents and purposes.

In many cases, a “strong” financial services sector can prevent countries from “stumbling” and harming their economies. On the other hand, inflexible and unclear legislation and obtuseness on the part of the authorities is liable to lead to the opposite result, such as the extraction of funds for investment abroad, discouraging the immigration / relocation of people to that country, removal of investments from the country and fears among foreign investors concerning relocating to that country from both the personal and business standpoints.

Unfortunately, since the enactment of the trusteeship chapter in the Income Tax Ordinance, the latter example is more applicable to Israel, such that instead of increasing tax collection and encouraging investors, the result has been the opposite. Moreover, the ambiguity in the above legislation has often forced a resident of Israel to refuse to serve as a trustee even in trusts whose assets are completely from foreign sources.

Even so, the Israeli legislation still offers many advantages to both Israeli and foreign residents with respect to establishing a trust for managing their assets and, even more so regarding the transfer of assets to the next generation of the family, including businesses, real estate and monies.

The legal institution that is called a trust is a long-established institution in the legal world in general and in the tax world in particular. This institution, with all its permutations, has been a familiar concept since the ancient Roman era and from early Jewish legal sources. This institution later became known in England, in a format more closely resembling today's trust. The initial use of this legal institution in the tax field appeared hundreds of years ago, when it developed primarily as a means for circumventing the nationalization laws applied by sovereigns to the property of deceased persons, a practice that known in our time as "estate tax" (whose rate was 100% in bygone times).

The purpose of a trusteeship today, with its integration into the fabric of modern legal life, is to arrange a series of issues which can be briefly described as follows: A. The transfer of property to the next generation, often skipping over the present generation. B. The protection of property from creditors. C. The settling of property relations between a couple who marry after one spouse has accumulated assets. D. Various types of tax planning, primarily estate tax, but also direct taxes and sometimes indirect taxes.

Still, despite the extensive use of trusts, few understand the intricacies of trusteeships in general, and particularly the tax laws that apply to them.

Acquiring in-depth knowledge of these professional “secrets” is a difficult and complicated quest and few legal and taxation experts in Israel have delved into this discipline. Even so, in total contradiction to the above, the technical aspect of establishing of a trust (particularly a foreign trust), is a simple task. For many years a telephone line and fax machine have been sufficient to set up a trust or quasi-trust entity in the Caribbean, Lichtenstein, the Cayman Islands, the Antilles, Jersey, Panama or similar remote location. After such a trust is established, cash and assets can be transferred to the trustees. Now, following the enactment of the trusteeship chapter in the Israeli Income Tax Ordinance, the changes in the warfare against black capital around the world, the stiffening of bank compliance laws the world over and the obligation to recognize international taxation laws, professionals involved in these fields will have to be all the more cautious lest they make a mistake.
The Israel Chamber of Trustees and its members are dedicated to assisting legislators in making trusteeship services efficient for the benefactors, the beneficiaries and the entire Israeli economy.

Arye Leybovich, Adv.

President, Israel Chamber of Trustees

Professional biography of the president of the Chamber of Trustees

Positions:

1. President of the Israeli Chamber of Trustees
2. Chairman and partner of Arye Leybovich & Co. Law Office
3. President of the OCEAN International Trust Group and its Israeli branch (OCEAN Trust company)
4. Co-Chairman of the Trusteeships Committee at the Israel Bar Association
5. Deputy Chairman of the Taxation Committee at the Tel Aviv branch of the Israel Bar Association
6. Member of the panel of experts at Chashavim
7. Lecturer on taxation and legal topics

Professional publications:

In addition to thousands of articles published in professional monthly journals, the printed press and other platforms, Adv. Leybovich has published several books, including:

1. Trusts and Trusts Taxation encyclopedia – a book that addresses all the general and tax law aspects relating to trusts in Israel and around the world. This book was defined by the Institute of Certified Public Accountants as a trailblazing addition to professional literature, and is the only book in Israel that presents the interfacing of trusts with the tax world in Israel and abroad.
2. Encyclopedia of Tax Treaties (Vol. II) – The first and most comprehensive book in Israel that presents the implications of international taxation in Israel, the tax treaties, explanatory material from the OECD, foreign court rulings, etc.
3. Tax Treaties – 111 Tables of Israel's Tax Conventions – A Comparative Law Analysis – A practical comparison for tax planning purposes, between the various tax treaties to which Israel is a signatory – with explanations of the various legal arrangements in each of the treaties.
4. Stamp Duty Law – This book examines the stamp duty and the influence of other tax laws that affect indirect taxation. This book includes hundreds of tax plans in this field and was one of the best-selling reference books of its type prior to the cancellation of the law.
5. Drafting a Commercial/Founders Agreement – A Practical Guide – A detailed practical guide to drawing up a commercial agreement, including the necessary legal clauses and mechanisms. This book is arranged such that it is accessible to both professionals (lawyers and accountants) and to non-professionals.