Teudot Sal (Exchange Trade Notes) conversion into mutual funds being delayed until around end of October 2018.


Since 1986, U.S. citizens living in Israel have been penalized in the form of higher U.S. taxes if they choose to invest some of their savings in Israeli or non-U.S. mutual funds.

The Internal Revenue Code defines these mutual funds as Passive Foreign Investment Companies or PFICs. As an alternative to investing in local mutual funds, many U.S. citizens living in Israel have chosen to invest in an investment vehicle called “Teudot Sal” or Exchange Trade Note (ETN), which are not PFICs. The ETNs usually track a market index.

Unfortunately, several months ago the Israeli government announced that “Teudot Sal” would convert into mutual funds at the end of April. Nonetheless, as with many other such announcements which have a deadline the Israeli government announced an extension/delay of the end of the “Teudot Sal” era.

Now it appears that “Teudot Sal” will be around until the end of October 2018. If you were planning to sell your “Teudot Sal” investments in the coming weeks, you can now delay that action. We, of course, will keep you posted if there are any announcements that could affect you. If you need a consultation on this issue, please contact us.

The writer is the CEO and President of Philip Stein and Associates.

About the Author
Philip is the founder of Philip Stein & Associates, the largest US accounting firm in Israel, specializing in US taxation of US tax residents living in Israel, and of Israeli individuals and companies doing business in the United States. Offices are in Jerusalem, Ramat Gan and Beit Shemesh. Philip grew up on the South Side of Chicago, and graduated from the University of Illinois, followed by an MBA from the University of Michigan. Philip started his career in the tax department of what today is Ernst & Young. He has lectured at Roosevelt University, Loyal University and Northeastern University, and continued to lecture on international tax issues in Asia, Africa, Europe and North American. He is also a frequent speaker for Nefesh B’Nefesh and has advised the Israeli Treasury, Bituach Leumi and the Knesset on various tax issues affecting US citizens living in Israel. Philip’s love of radio led him to start his podcasts which have attracted tens of thousands of listeners. He continues to be an avid Chicago sports fan as well as a lover of mountain hiking, TRX, and snowshoeing (he likes to keep his feet on the ground!).
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