Quick Answer: Canada and Israel signed a new income tax convention in September 2016 that entered into force on December 31, 2016, replacing a 1975 agreement. It caps Israeli withholding tax on dividends paid to Canadian residents at 5% for qualifying corporate shareholders holding 25% or more of the Israeli company, and at 15% in all other cases. Interest is capped at 10% (5% for unrelated financial institutions). Royalties for software, patents, and know-how are entirely exempt from withholding. Capital gains on shares are generally taxable only where the seller resides, with a real-property-company exception. The Israel Tax Authority (ITA) and the Canada Revenue Agency (CRA) must each be engaged before reduced rates apply — neither applies treaty rates automatically.

Canada and Israel have one of the most commercially active bilateral relationships in the region, anchored by a large diaspora community with roots running in both directions. Toronto, Montreal, and Vancouver together host roughly 400,000 Jewish Canadians, a significant number of whom own Israeli real estate, hold stakes in Israeli companies, or receive income from Israeli sources. In the other direction, Canadian pension funds, private equity firms, and technology companies have become meaningful investors in Israel's startup ecosystem.

A lot of this relationship goes undertaxed — in the wrong direction. Many Israeli companies withhold at the full domestic rate of 25% on dividends paid to Canadian shareholders simply because no one has applied for the reduced rate certificate. Many Canadian Olim struggle with the interaction between Israeli tax exemptions for new residents, Canada's departure tax rules, and what happens to their RRSPs after they move. And many Canadian businesses licensing software to Israeli clients do not realise their royalties may be entirely exempt from Israeli withholding. What follows covers the key provisions of the 2016 treaty and the mechanics of claiming each one from the ITA and the CRA.

1. Background: from the 1975 agreement to the 2016 convention

The original Canada-Israel income tax convention was signed on July 21, 1975 and entered into force in 1976. It reflected the international tax norms of its era and worked well enough for decades, but by the 2000s both countries had developed considerably more sophisticated tax systems. Israel had modernized its Income Tax Ordinance, introduced the 10-year new-immigrant exemption regime in 2007, and built one of the world's most active technology sectors. Canada had reformed its foreign affiliate and controlled foreign corporation rules and was renegotiating its treaty network systematically.

Negotiations for a new convention began in the early 2010s. A new Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income was signed on September 21, 2016 in Tel Aviv. Both countries completed their domestic ratification procedures, and the convention entered into force on December 31, 2016, with its provisions applying to withholding taxes from January 1, 2017 and to other taxes from January 1, 2017 for Canada and for tax years beginning on or after January 1, 2017 for Israel.

From that date, the 1975 convention ceased to apply to any matter to which the 2016 convention applies. The 2016 text follows the OECD Model Convention structure and incorporates modern provisions including the principal purpose test, which allows the ITA or the CRA to deny treaty benefits where obtaining those benefits was one of the principal purposes of an arrangement. Both the English and Hebrew official texts are equally authoritative; the French version of the Canadian text also carries official status.

2. Tax residency: the threshold question

The treaty applies only to a "resident of Canada" or a "resident of Israel," as defined in the treaty's residency article by reference to each country's domestic law. A person is a resident of Canada if, under Canadian law, they are liable to tax there based on domicile, residence, place of management, or any other similar criterion. The ordinary meaning for an individual is Canadian tax residency, determined by the CRA on the basis of residential ties: a home available for use in Canada, a spouse or dependants in Canada, personal property and social ties in Canada.

Israel defines residence under Section 1 of the Income Tax Ordinance [New Version], 5721-1961, using a "center of life" test. The Israel Tax Authority weighs where the person's family, permanent home, professional relationships, economic interests, and social connections are located. Statutory presumptions apply: 183 days or more in Israel in any tax year, or 30 days in the current year plus 425 cumulative days across the current and two preceding tax years, shifts the burden of proof to the individual to show that their center of life is outside Israel.

Dual residency — where both countries claim the same person as a resident — is resolved by the treaty's tie-breaker hierarchy. The countries first look at where the individual has a permanent home available. If homes exist in both countries, they look at where the individual's center of vital interests sits: personal and economic relations, family, employment, social activities. If that test is indeterminate, they look at habitual abode, then nationality, then mutual agreement between the two competent authorities (the ITA and the CRA's Competent Authority Services Division).

In Practice — Managing Departure from Canada Before Aliyah: When a Canadian citizen or long-term resident moves to Israel, Canada's departure tax rules under Section 128.1 of the Income Tax Act trigger a deemed disposition of most assets on the date the individual ceases to be a Canadian resident. Capital gains accrued to that date are assessed and taxed by Canada at departure — not when the assets are eventually sold. For a Canadian holding significant Israeli startup shares, publicly traded securities, or real estate outside Canada, this departure tax can represent a substantial liability even before a shekel is received. The deemed disposition does not apply to Canadian real estate (taxed when sold), pension plans (taxed on withdrawal), and stock options (separate rules). Proper pre-aliyah planning means choosing the right departure date, understanding which assets trigger the deemed disposition, whether to elect the deferral provisions under Section 220(4.5) of the Income Tax Act, and ensuring the ITA in Israel is aware of the asset base at the time of becoming an Israeli resident. Do this before landing, not after — the base is fixed on the departure date and cannot be retrospectively adjusted.

3. Dividends: 5% for qualifying companies, 15% for everyone else

Israeli domestic law imposes a 25% withholding tax on dividends paid to non-resident individuals and a 30% rate for "significant shareholders" — those holding 10% or more of any means of control in the Israeli company — under Sections 164 and 170 of the Income Tax Ordinance. An Israeli company paying a dividend to a Canadian shareholder is legally required to withhold at these domestic rates unless a treaty-based Reduced Withholding Tax Certificate has been obtained from the ITA in advance.

The treaty's dividend article overrides these rates. Two reduced rates apply to Canadian residents receiving dividends from Israeli companies:

  • 5% of the gross dividend, where the beneficial owner is a company (not a partnership) that has directly or indirectly held at least 25% of the capital of the Israeli paying company throughout a 365-consecutive-day period that includes the dividend payment date.
  • 15% of the gross dividend in all other cases, including dividends paid to individual Canadian shareholders, to companies that have not met the 365-day holding test, and to companies holding less than 25% of the Israeli company's capital.

The beneficial owner requirement is strictly interpreted. A Canadian holding company that is itself owned by residents of a third country does not qualify for treaty rates if the structure was put in place primarily to access those rates. The principal purpose test in the 2016 convention reinforces this: the ITA can deny treaty benefits where obtaining them was a principal purpose of the arrangement.

Two additional provisions favor institutional investors. Israeli pension funds that receive dividends from Canadian companies — where the fund holds no more than 10% of the Canadian company's capital or voting power — are fully exempt from Canadian withholding. This exemption is primarily relevant for Israeli institutional investors holding Canadian equities, not for individual investors. Similarly, the 5% rate on Israeli-source dividends extends to Canadian corporate investors that are pension funds or similar tax-exempt entities, subject to conditions set out in the treaty's limitation-on-benefits provisions.

In Practice — Claiming the 5% Rate on a Dividend from an Israeli Subsidiary: A Canadian holding company that owns 30% of an Israeli operating company and has held that stake for two years wants to receive a NIS 500,000 dividend. Without action, the Israeli company will withhold NIS 125,000 (25%), leaving the Canadian company with NIS 375,000. To withhold at the treaty rate of 5% instead, the process is: (1) The Canadian company obtains a Certificate of Residence from the Canada Revenue Agency — this is a standard document issued by the CRA's International Tax Services Office upon request, usually within 4 to 6 weeks. (2) The Israeli company submits that certificate, together with an application for a ishur nikui mekor mufhat (Reduced Withholding Tax Certificate), to the Withholding Tax Unit at the ITA District Tax Office covering the Israeli company's registered address. (3) The ITA reviews the application, confirms the 365-day holding test is satisfied, and issues the certificate specifying the approved rate and period of validity. Processing typically takes 30 to 60 working days. (4) With the ITA certificate in hand, the Israeli company withholds NIS 25,000 (5%) on the dividend and remits to the ITA within 7 days of the end of the month in which the dividend is paid. The saving in this example is NIS 100,000. If the dividend is paid before the certificate arrives, the Israeli company must withhold at 25%, and the Canadian company files ITA Form 2513 (Request for Refund of Excess Withholding Tax) to recover the difference — a valid but slower route, with a five-year filing window.
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4. Interest: 10% general rate with a carve-out for banks

Israeli domestic law imposes 25% withholding on interest paid to non-resident individuals under Section 170(a) of the Income Tax Ordinance. Various categories of Israeli-source interest paid to registered foreign investors may attract different rates or exemptions under domestic rules — foreign-currency bank deposits and certain TASE-listed bonds held by registered non-resident investors may be exempt or taxed at lower rates — but 25% is the default for general interest payments to non-residents without specific registration.

The treaty's interest article reduces the withholding ceiling to 10% of the gross interest for payments between unrelated parties who are beneficial owners of the interest. A specific carve-out reduces this further: interest paid by an Israeli borrower to an arm's-length Canadian financial institution — a bank, credit union, or similar entity — that is not related to the Israeli payer and is not receiving "participating interest" (interest whose amount varies with the borrower's profits) is capped at just 5%.

Certain categories of interest are completely exempt from withholding under the treaty. Interest paid to the government of the other state, its central bank, or a body wholly owned by the government is exempt. Interest paid to certain tax-exempt pension plans under the domestic law of the recipient's country is also exempt, a provision that benefits Canadian registered pension plans and similar entities receiving interest on Israeli bonds or deposits.

Watch out for CPI-linked instruments. Israeli CPI-linked bonds and deposits generate two components of return — a coupon and a CPI adjustment that compensates for inflation. The ITA treats the full return, including the CPI component, as income for withholding purposes under the Income Tax Ordinance. Canadian investors who assume the inflation-adjustment component is a non-taxable capital return may face unexpected withholding on the full gross receipts from index-linked instruments. Verify the treatment in advance with a tax adviser familiar with both Israeli and Canadian rules before committing to these instruments.

5. Royalties: software and patents exempt, equipment at 10%

The royalties article sets a general withholding rate of 10% on gross royalties between the two countries, then carves out a complete exemption for the categories that matter most to technology and pharma businesses.

Royalties paid for the use of computer software, patents, or know-how are exempt from withholding in the source country — provided the royalty is not paid under a rental or franchise agreement. Concretely:

  • An Israeli company that licenses its software platform to a Canadian business pays no Israeli withholding on the royalty.
  • A Canadian pharma company that licenses a patent to an Israeli licensee owes no Canadian withholding on the royalty flowing back to Canada.
  • An Israeli research company receiving know-how royalties from a Canadian corporation pays no withholding in either country on those payments — provided the correct treaty formalities are observed.

The rental and franchise carve-out to the exemption matters in practice. A payment that is economically a software subscription under a month-to-month arrangement, structured as a rental fee in the contract, may not qualify for the exemption and could attract the 10% general rate. How the contract characterizes the payment — and whether it conveys the right to use the intellectual property versus merely a right of access — determines which rate applies. Have an Israeli tax lawyer review software and licensing contracts with Canadian parties before the first payment crosses the border.

The 10% general royalty rate applies to industrial, commercial, or scientific equipment rentals, to copyright royalties that do not qualify under the software/patent/know-how exemption, and to any other payment for the use of property that the treaty classifies as a royalty. Under Israeli domestic law, the ITA may assert a higher position on royalties paid for certain types of intellectual property developed with Israeli government grants under the Research and Development Encouragement Law — verify this dimension separately with an Israeli tax adviser.

6. Capital gains: residence-based with a real-property exception

Under the treaty's capital gains article, gains from the sale of shares or other company interests are generally taxable only in the state where the seller resides at the time of the sale, not in the state where the company is incorporated. For a Canadian resident selling shares in an Israeli company, this means Israel has no taxing right under the treaty, and Israel cannot impose withholding under Section 170 of the Income Tax Ordinance on the sale proceeds.

One exception overrides the residence rule. Where more than 50% of the value of the shares derives from real property situated in Israel, Israel retains the right to tax the capital gain. This "immovable property company" test catches Israeli holding companies whose primary assets are real estate, certain Israeli real estate investment structures, and property-heavy groups where a parent company's value is predominantly in Israeli land and buildings. For a typical Israeli technology company, the 50% threshold is not met, and the gain is taxable only in Canada.

Where the exception applies and Israel has the taxing right, the buyer is required to withhold from the purchase price under Section 170 unless the ITA has issued an exemption certificate to the seller. The buyer in any share sale where real-property content is uncertain should request confirmation from the seller before releasing sale proceeds, because the buyer carries secondary liability for unwithheld amounts.

In Practice — The Exit Tax Trap When Leaving Israel for Canada: Israeli residents who cease to be Israeli tax residents trigger Section 100A of the Income Tax Ordinance, which deems a disposal of all their assets on the departure date. The deemed capital gain — the difference between market value on the departure date and the adjusted cost base — is locked in and taxed by Israel when the assets are eventually sold, at the capital gains rate applicable on the actual sale date, apportioned to the Israeli period. Israel provides a deferral: you pay nothing on departure and settle the Israeli tax when you actually sell, apportioning the gain between the Israeli accrual period and the Canadian period. From Canada's side, an individual who becomes a Canadian tax resident is treated as having acquired all their property at fair market value on the date of arrival (Section 128.1(1)(b) of the Canadian Income Tax Act). This "step-up in basis" means Canada only taxes gain accruing after Canadian residency begins. The two systems interact well in principle — Israel taxes the pre-departure gain and Canada taxes the post-arrival gain — but the mechanics require careful coordination. Establish the fair market value of all assets on both the Israeli departure date and the Canadian arrival date (which may differ by days or weeks), and retain documentation of those valuations. The Israel Tax Authority's assessment unit for non-residents can be contacted for advance rulings on specific assets; the ruling request should be filed before departure, not after.

7. Employment income, pensions, and business profits

Employment income. Under the employment article, income from employment is taxable in the country where the work is physically performed. A Canadian national working in Israel for more than 183 days in any 12-month period is subject to Israeli income tax on their Israel-work income, with no treaty reduction. The 183-day count is not necessarily a calendar year — the treaty uses a rolling 12-month period, which is stricter than some other Israeli tax conventions. A Canadian employee sent to Israel by a Canadian employer for fewer than 183 days may remain taxable only in Canada if the employer is Canadian, the remuneration is paid by the Canadian employer, and the cost is not borne by an Israeli permanent establishment of the Canadian employer.

Directors' fees. Fees paid to a director of an Israeli company are taxable in Israel regardless of where the director resides. A Canadian resident who serves on the board of an Israeli company is subject to Israeli income tax on those fees, and the Israeli company must withhold under standard rates at source.

Pensions. Pensions and similar remuneration for past employment are taxable only in the state where the recipient resides at the time of receipt. An Israeli tax resident receiving a Canadian registered pension plan payment, a defined-benefit pension from a former Canadian employer, or a Canada Pension Plan (CPP) benefit in principle owes Israeli income tax on that income, and Canada should not withhold. In practice, Canadian pension administrators apply 25% non-resident withholding by default because the payer does not know the recipient's treaty position unless formally notified. Canadian Olim in this situation must file NR5 and NR73 forms with the CRA, accompanied by an Israeli Certificate of Residence, to stop the Canadian withholding. The process takes several months; plan for gaps in withholding reconciliation and budget accordingly.

Business profits. A Canadian company's profits from Israeli customers are taxable in Israel only if the Canadian company carries on business through a permanent establishment in Israel. The treaty defines permanent establishment broadly: a fixed place of business (office, factory, workshop), a building site or installation project lasting more than nine months, a dependent agent who habitually exercises authority to conclude contracts in Israel, or an employee working in Israel for an extended period. A Canadian company that sells products or services to Israeli buyers through an independent Israeli distributor, without maintaining any employees or owned premises in Israel, generally does not have an Israeli permanent establishment. But a Canadian company whose Israeli-based employee is closing contracts on the company's behalf on an ongoing basis almost certainly does — and the resulting permanent establishment triggers Israeli corporate tax at 23%, retroactive VAT obligations, and NII contribution arrears.

8. Canadian registered plans: RRSPs, TFSAs, and CPP

What happens to Canadian registered savings plans after aliyah is the question most Olim ask first. The 2016 treaty gives clearer answers than the 1975 convention did, but several gaps remain.

Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs). The treaty recognizes these vehicles as pension plans for treaty purposes. Withdrawals from an RRSP or RRIF while the individual is an Israeli tax resident are, in principle, taxable only in Israel under the pensions article of the treaty. Canada applies 25% non-resident withholding on RRSP withdrawals by default, making it necessary for the account holder to file the relevant CRA forms — including NR5 (Application to Reduce Withholding) supported by an Israeli Certificate of Residence — before withdrawals begin. Once withholding is reduced or eliminated at source, the gross withdrawal is includable as income on the Israeli tax return. Israeli new immigrants in the 10-year tax exemption period under the Income Tax Ordinance should analyze whether RRSP withdrawals qualify as "foreign income" for exemption purposes with an Israeli tax adviser, as the ITA's position on this can affect the planning decision of when to draw down the account.

Tax-Free Savings Accounts (TFSAs). TFSAs are not recognized as pension plans in most Canadian tax treaties, and the 2016 Canada-Israel convention does not specifically address them. Income and gains earned inside a TFSA remain tax-free in Canada under Canadian domestic law. The ITA takes the position that a TFSA is a foreign trust for Israeli tax purposes, and income accumulated inside the account may be attributed to the Israeli-resident account holder as taxable income in Israel under Section 75B of the Income Tax Ordinance. Canadians making aliyah who hold significant TFSA balances should take advice on the Israeli trust-reporting and taxation rules before moving — the disclosure obligations at the ITA can be substantial, and failure to comply carries meaningful penalties.

First Home Savings Account (FHSA). The FHSA, introduced by Canada in 2023, is even less likely to receive favorable treaty recognition than the TFSA. Its status under Israeli law is unclear, and Olim who hold FHSAs should seek specific advice before moving to Israel.

Canada Pension Plan (CPP) and Old Age Security (OAS). CPP and OAS payments received by a Canadian Olim living in Israel are, in principle, taxable only in Israel under the pensions article. Canada again applies default 25% non-resident withholding, reduced by filing appropriate forms with Service Canada and the CRA's International Tax Services Office. The coordination process takes time — start at least four to six months before your first payment if you are approaching CPP or OAS age while planning aliyah.

In Practice — RRSP Withdrawal Planning for Canadian Olim in the 10-Year Exemption Period: An Israeli new immigrant (oleh) benefits from a 10-year exemption on foreign-source income under Section 14 of the Income Tax Ordinance. Whether RRSP withdrawals qualify as "foreign income" for this exemption depends on the ITA's characterization: if treated as foreign pension income, the withdrawal may be exempt in Israel for up to 10 years from the date of aliyah, making the exemption window the optimal time to draw down the account. In that scenario, no Israeli tax applies, and with proper CRA forms, no Canadian tax either — an outcome that dramatically reduces lifetime RRSP taxes compared to withdrawing after the exemption expires. This analysis has to be done carefully for each individual because the ITA's position is not guaranteed, the CRA's rules on treaty elections interact with the Section 217 election for certain Canadian income, and drawing down an RRSP during the exemption period instead of later in life may affect other income-tested Israeli benefits including NII allowances and Kupat Holim (health fund) subsidy calculations. Get a written opinion from an Israeli-certified tax specialist who also holds Canadian tax expertise before making large RRSP withdrawals.

9. How to claim treaty rates: the practical mechanics

Neither the ITA nor the CRA applies treaty rates automatically. Both countries require affirmative steps by the taxpayer or the withholding agent before the reduced rates take effect. Waiting for a refund after over-withholding is valid but slower and ties up cash unnecessarily.

Claiming reduced Israeli withholding on dividends and interest. For a Canadian resident receiving Israeli-source passive income, the process runs in three steps. Step one: obtain a Certificate of Residence from the CRA. Individuals file Form T1261 (Application for a CRA Individual Tax Number for Non-Residents) or, if already registered, request the certificate directly from the International Tax Services Office in Ottawa. The CRA typically issues these within four to eight weeks. Companies request the certificate through their tax service provider or directly from their CRA tax centre. The certificate confirms Canadian tax residency for the current year or the year in question.

Step two: submit the Canadian Certificate of Residence to the Israeli payer (the company, bank, or debtor). The Israeli payer then applies for a ishur nikui mekor mufhat (Reduced Withholding Tax Certificate) from the Withholding Tax Unit at the relevant ITA District Tax Office. The application names the Canadian payee, states the income type, and cites the applicable treaty rate. The ITA processes the application within 30 to 60 working days and issues a certificate specifying the approved rate and the period of validity.

Step three: with the ITA certificate in hand, the Israeli payer withholds at the treaty rate on future payments and remits the withheld amount to the ITA within 7 days of the end of the calendar month of payment. The Israeli payer must retain both the Canadian Certificate of Residence and the ITA certificate in its records for potential audit.

If withholding has already occurred at the higher domestic rate before a treaty certificate is obtained, the Canadian recipient files ITA Form 2513 (Request for Refund of Excess Withholding Tax) to recover the overpaid amount. Refund applications must be filed within five years of the end of the Israeli tax year in which the withholding occurred. The ITA's Foreign Residents Unit in Tel Aviv handles these applications; refunds typically take six to twelve months to process.

Claiming exemption on software and patent royalties. Where the zero-rate royalty exemption applies, the Canadian recipient must provide the Israeli payer with an Israeli Certificate of Residence — issued by the ITA for the Israeli-resident party — along with a statement confirming that the royalty falls within the exempt category (software, patent, or know-how) and is not structured as a rental or franchise fee. The Israeli payer may nonetheless apply to the Withholding Tax Unit for confirmation before withholding at zero; in practice, for material amounts, obtaining advance ITA confirmation avoids audit risk on the payer side.

On the Canadian side. A Canadian company receiving royalties from an Israeli payor, or an Israeli company receiving royalties from Canadian sources, should provide a CRA Certificate of Residence to the withholding agent in the other country to activate the zero-rate exemption under Canadian domestic rules for the relevant treaty. For Israeli-source interest paid to a Canadian financial institution at the 5% rate, the Israeli borrower applies to the ITA for a reduced-rate certificate in the same manner as for dividends, citing the financial institution carve-out.

In Practice — Timeline Reference for Common Treaty Claims at the ITA: Reduced Withholding Tax Certificate for dividends or interest: application by the Israeli payer to the District Withholding Tax Unit, processing 30 to 60 working days, valid for one tax year and renewable. Withholding exemption for capital gains on share sales: application by the seller to the Capital Gains Unit at the ITA's relevant District Office, processing approximately 20 to 30 working days, valid for the specific transaction. Excess withholding refund via Form 2513: filed directly by the foreign recipient or their Israeli tax representative to the ITA Foreign Residents Unit in Tel Aviv, refund issued typically within 6 to 12 months of a complete filing, five-year limitation from the end of the relevant Israeli tax year. The ITA District Tax Office for Tel Aviv covers the majority of non-resident claims. Correspondence is expected in Hebrew; most non-residents engage an Israeli CPA or tax lawyer with a power of attorney to act as their local representative. CRA International Tax Services Office (Ottawa) handles Canadian-side certificate requests and treaty-based refund claims; processing for certificates is 4 to 8 weeks, refund claims 6 to 12 months.

Frequently Asked Questions

Only on Canadian-source income. Once you have moved your center of life to Israel and become an Israeli tax resident under Section 1 of the Income Tax Ordinance, you are no longer a "resident of Canada" for treaty purposes. The treaty cannot reduce Israeli tax on your Israeli-source income. However, it continues to protect your Canadian income: a Canadian registered pension plan, RRSP payments, Canadian rental income, and Canadian dividends all remain covered by the relevant treaty articles even after you become an Israeli resident.

Five percent, provided the Canadian company is the beneficial owner and has held at least 25% of the capital of the Israeli company for a continuous 365-day period that includes the dividend payment date. Without a valid Certificate of Residence from the Canada Revenue Agency and a Reduced Withholding Tax Certificate from the Israel Tax Authority, the Israeli company is required by law to withhold at the domestic rate of 25% under Section 170 of the Income Tax Ordinance. Do not withhold at treaty rates without the ITA certificate in hand.

No, if the royalty is paid for the use of computer software, patents, or know-how and is not structured as a rental or franchise fee. The 2016 Canada-Israel treaty specifically exempts these categories from withholding tax, reducing the applicable rate to zero. Industrial equipment rentals and other royalty-type payments that do not fall under those categories remain subject to the general 10% treaty rate. Ask your Israeli tax adviser to review the contract characterization before the first payment is made, because how the agreement describes the payment — right to use versus right of access — determines which rate applies.

Israel recognizes Canadian RRSPs as pension plans for treaty purposes. Withdrawals from an RRSP while you live in Israel are in principle taxable only in Israel under the pensions article, and Canada should not withhold. However, Canadian financial institutions apply 25% non-resident withholding by default. You must file NR5 and NR73 forms with the CRA, supported by an Israeli Certificate of Residence, to stop that withholding before you begin withdrawals. Your Israeli income tax return must include RRSP withdrawals as taxable income in Israel, subject to marginal rates unless you are in the 10-year new-immigrant exemption period and the ITA confirms the withdrawal qualifies as exempt foreign income.

No. Israel abolished inheritance and estate tax in 1981. There is nothing on the Israeli side for an inheritance treaty to address. Canada levies a deemed-disposition tax at death on capital gains accrued on assets held outside registered plans, but that is an income tax event and falls within the capital gains article of the income tax convention rather than a separate inheritance treaty. A Canadian resident inheriting Israeli assets does not pay Israeli inheritance tax, but the Israeli estate may owe outstanding Israeli income or capital gains taxes that must be settled through the probate process before assets are distributed to heirs.

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