Summary
Israeli pensions, provident funds, and long-term savings remain subject to Israeli rules but can also create reporting and tax obligations in the new country, particularly the USA and Canada. Accessing these funds or drawing a pension after relocation can trigger complex cross-border taxation.
Key facts and rules
- Israeli pension access: Israeli law generally restricts pension withdrawals before retirement age and imposes tax on early withdrawals; special tax rates can apply to regular pension income at retirement.
- US FBAR reporting: For US citizens or residents, Israeli pension accounts must often be reported on FBAR (FinCEN Form 114) if the aggregate value of all foreign financial accounts exceeds $10,000 at any time in the year.
- US FATCA (Form 8938): Additional reporting applies for foreign financial assets. Thresholds for taxpayers living abroad start at $400,000 (filing jointly, valued on December 31) or $600,000 at any point in the year.
- US tax on Israeli pensions: For non-US persons who move to the US, US courts often treat the entire pension distribution as taxable in the US to the extent contributions were not previously taxed there.
- Canada T1135 reporting: Canadians must file Form T1135 if the cost of specified foreign property (including many foreign pensions and investment accounts) exceeds CAD 100,000 at any time during the year.
- Treaty interaction: Tax treaties may allocate primary taxing rights on pension income to one country. Under the Israel-US treaty, Israel may have first taxing rights on pensions after the 10-year Israeli exemption window.
Common pitfalls
- Assuming that keeping funds in Israeli pensions avoids foreign reporting — it rarely does for US or Canadian residents.
- Treating early withdrawals as tax-free abroad just because they were exempt in Israel; most countries have their own pension-tax rules.
- For US movers, misunderstanding the interaction of pre-move contributions and later US taxation, leading to unexpected full taxation of distributions.
Action checklist
- Obtain a full list of your Israeli pension and savings plans (pension funds, keren hishtalmut, provident funds, insurance policies) and keep annual statements.
- In your destination country, confirm whether these are treated as pensions, foreign trusts, PFICs, or regular investment accounts, and what reporting forms apply.
- Check whether treaty provisions modify taxation of pension contributions, growth, and withdrawals.
- Coordinate timing of withdrawals and pension start dates to minimize double taxation and optimize foreign-tax-credit usage.
Important: Pension and savings treatment is one of the most complex relocation topics and should always be modeled with advisors in both countries before any withdrawals or transfers.