Exit Tax Under Section 100A: How Tax Is Calculated When Severing Residency

Exit tax under Section 100A of the Income Tax Ordinance treats the assets of anyone who ceases to be an Israeli resident as though they were sold on the day before the severance of residency. It applies to capital assets, including employee stock options and shares, even when nothing is actually sold. The tax may be paid on the date of severance. Anyone who did not pay is deemed to have elected to defer payment until the actual sale, at which point Israel taxes a proportionate share of the gain, with linkage differentials and interest accruing only from the date of sale.

The section creates a deemed sale on the day before severance and leaves the taxpayer the choice of when to pay. The following provisions govern the calculation:

• Subsection (a): An asset of an Israeli resident who ceases to be an Israeli resident is deemed sold on the day before the day on which the person ceased to be a resident.

• Subsection (b): Anyone who did not pay the tax on the date of severance is deemed to have elected to defer it until the asset is realized. On the date of realization, the taxpayer pays tax on the "taxable portion of the gain," and linkage differentials and interest under Section 159A accrue only from that date until payment.

• Subsection (c): If the sale is in any event subject to tax in Israel at the time of realization, the tax is then paid on the entire capital gain, instead of the proportionate calculation.

• Subsection (d): The "taxable portion of the gain" is the real capital gain on the date of sale, multiplied by the holding period from the date of acquisition to the date of severance, and divided by the total holding period until the date of sale. "Asset" also includes shares and rights granted under Sections 3(i) and 102.

The section refers to a "person" rather than an "individual." It therefore also applies to a company that ceases to be an Israeli resident. The exact date on which residency was severed is determined by the center-of-life test and the day-count presumptions, which we discuss on our page Severance of Tax Residency. The date of severance is especially important here, because the day before it is the deemed date of sale.

Start with a list of assets and the value of each on the day before severance. For each asset you also need the acquisition cost and the acquisition date, because both figures feed into the calculation under either track.

Payment on the Date of Severance

Under this track, the capital gain is calculated based on the value on the day before severance, and the tax is paid on the gain accrued up to that point. Any appreciation after departure is excluded from the Israeli calculation. For an unlisted asset—for example, shares in a private company—the value on that date is established by a valuation, which the assessing officer is entitled to examine.

Deferral Until Sale

Under this track, nothing is paid on the date of departure. On the date of sale, the actual real capital gain is calculated, and the portion attributable to the period before severance is allocated to Israel.

For example (hypothetical case): Shares were acquired on 1.1.2018, the owner severed residency on 1.1.2024, and sold them on 1.1.2028. The real capital gain on sale is NIS 1,000,000. The holding period until severance was 6 years out of 10, so the taxable portion in Israel is NIS 600,000 (1,000,000 multiplied by 6, divided by 10). If the real gain on the day before severance was NIS 300,000, payment on the date of severance would have imposed tax on only NIS 300,000.

Employee Options and Shares

For options and shares granted to employees, the Israel Tax Authority allocates the income according to the place where the work was performed during the vesting period. Income Tax Circular 9/2025, which deals with the taxation of employee stock options, provides examples of an employee who ceased to be an Israeli resident and later returned. We discuss the practical aspects of relocation in our article on Exit Tax on Options in Relocation.

According to the Israel Tax Authority, no. In Reportable Position 11/2016 the Authority stated that Section 100A does not conflict with tax treaties and does not yield to them, even when the taxpayer moves to a country that has a treaty with Israel. If double taxation arises at the time of sale, the Authority refers taxpayers to the mutual agreement procedure between the tax authorities, pursuant to Income Tax Implementation Directive 23/2001. A reportable position is a position of the Authority, and any taxpayer who takes the opposite position in a return must disclose this.

In the Koenig case, the appellant ceased to be an Israeli resident on 24.5.2005 and sold shares in August 2007. The Tel Aviv District Court (Tax Appeal 13807-01-17, 1.5.2018) held him liable for tax under the proportionate formula, ruling that he had not proved he was entitled to protection under the treaty with the United States. In obiter dictum, the court added that there is no conflict between the section and the treaty, because the deemed sale occurs while the taxpayer is still an Israeli resident. The Supreme Court dismissed the appeal on 11.11.2019 (CA 5694/18) in a brief judgment relying on the District Court's reasoning, and held that Section 100A and the linear formula apply to the case.

In November 2021, the Committee for International Tax Reform recommended that under the immediate-payment track, a report and advance payment be filed within 90 days of severance, together with a capital declaration as of the date of the deemed sale. As of October 2026, these recommendations have not been enacted into law, and the section applies in its current wording.

Before the move, and in any event before selling an asset afterward. These are the situations in which the calculation changes the outcome:

1. You hold shares in a private company expected to increase in value, and you are moving abroad this year. A valuation as of the day before severance determines how much you will pay under the immediate-payment track.

2. Your options or RSUs continue to vest after the move, so part of the income will be attributed to Israel and part to the new country.

3. The new country is expected to tax the entire gain on sale. You need to check what the treaty provides and whether a credit for the Israeli tax will be available there.

4. You have already sold an asset after departure and did not report it in Israel. Under Section 100A(b), you are deemed to have elected deferral, and the tax on the taxable portion of the gain is payable on the date of sale.

5. A foreign company under your control is currently managed from Israel, and its management is about to move abroad together with you.

Exit tax cases and pre-relocation planning are handled at the office of Adv. and CPA Shlomi Vaknin and his team, as part of Tax Advisory and Planning for Companies and Individuals. Before founding the firm in 2024, Shlomi was a senior partner at a tax law firm for 18 years.