ΕλληνικάFor fifteen years the Israeli regime for new immigrants and veteran returning residents offered two things at once: a ten-year exemption from tax on foreign-source income, and a ten-year exemption from reporting it. The second of those is now gone, and a different benefit has taken its place. Anyone advising on relocation to Israel, or considering it personally, is working with a materially different set of incentives from the one that applied until the end of 2025 — and the date on which residency begins now determines which regime applies.
What changed, and in which order
Two separate measures are involved and they are frequently confused. Amendment 272 to the Income Tax Ordinance [New Version] 5721-1961, passed by the Knesset on 2 April 2024 and published on 7 April 2024, repealed the reporting exemption contained in sections 134B and 135(b), which had been introduced by Amendment 168 in 2008. Separately, the Law for the Encouragement of Immigration to Israel and Return Thereto (Temporary Provision), 5786-2026, enacted within the budget package of 30 March 2026 and published in the Book of Laws 3511 on 31 March 2026, introduced a new and temporary exemption on Israeli-source active income.
The first measure removes a privacy benefit. The second adds a monetary one. They point in opposite directions, and for anyone whose move is still in planning they have to be weighed together rather than separately.
The repeal of the reporting exemption
The substantive tax exemption survives. An individual who qualifies as an Israeli resident for the first time, or as a veteran returning resident — that is, a person who was not an Israeli resident for at least ten consecutive years before returning — continues to enjoy the ten-year exemption from Israeli tax on foreign-source income and capital gains. What has been withdrawn is the parallel exemption from reporting that income and those assets.
For anyone who became an Israeli resident on or after 1 January 2026, foreign income, foreign assets and foreign structures must be reported to the Israel Tax Authority from the first return onward, notwithstanding that the income itself remains untaxed. Reportable items include foreign bank and investment accounts, foreign real estate, foreign pension arrangements, foreign companies and trusts, and beneficial ownership in foreign structures. Trusts whose settlor or beneficiary is a new immigrant fall within the reporting net, and the Tax Authority has been given power to request information regarding foreign companies managed from Israel by such individuals.
Those who became Israeli residents by 31 December 2025 retain the previous position for the balance of their benefit period. The cut-off is therefore absolute and turns on the date the centre of life shifts, not on the date of a visa or a certificate.
The origin of the amendment explains its character. It followed a review by the Global Forum on Transparency and Exchange of Information for Tax Purposes, which found that Israel fell short of international transparency standards precisely because information on the income and assets of new immigrants remained outside automatic exchange. The change is therefore unlikely to be reversed, and should be planned around rather than waited out.
The Tax Authority’s implementation guidance
On 26 October 2025 the Israel Tax Authority published a draft circular for public comment setting out how it proposes to apply the amendment. Among other matters, the draft provides that foreign-source income during the exemption period is to be reported on a designated form annexed to the annual return and to any applicable trust return, with comprehensive disclosure of worldwide income categorised by source and converted into shekels. Classification and computation are to follow the Income Tax Ordinance, except where the income is reported in a treaty country — either the country of source or the country of prior residence — in which case the figures and classifications used in that country’s returns may be followed.
The draft also addresses reporting of foreign assets in a capital declaration where one is required, the treatment of the acclimation year, reporting by a foreign company controlled by a benefited individual, the position of a benefited individual who is a representative assessee in a family company or land company, and the treatment of a United States limited liability company. Because the document was issued in draft for comment, its final form should be confirmed before any reporting position is adopted in reliance on it.
The new exemption on Israeli-source income
The Temporary Provision does something the Israeli regime has never done. Israeli-source income was always taxable in full, whatever the individual’s immigrant status; the historic benefit attached only to foreign-source income. The new law exempts qualifying Israeli-source active income — income from employment or from a business carried on in Israel — within annual ceilings that taper over five years.
| Tax year | Exempt ceiling on Israeli-source active income |
| 2026 | NIS 600,000, pro-rated by reference to the period of Israeli residency during the year |
| 2027 | NIS 1,000,000 |
| 2028 | NIS 1,000,000 |
| 2029 | NIS 350,000 |
| 2030 | NIS 150,000 |
Two limits matter. First, the exemption reaches active income only. Passive Israeli-source income — interest, dividends, rent, exchange differences, capital gains and real estate gains — remains fully taxable. Second, where qualifying income is received from a related party, other than a wholly owned company, the exempt amount is capped at NIS 140,000 per year. That restriction is plainly directed at arrangements in which a family or connected entity is used to route income into the exemption.
Eligibility runs to new immigrants holding an immigrant visa or certificate under the Law of Return, or entitled to an absorption package, and to veteran returning residents who had been abroad for at least ten years. The qualifying window is residency taken up between 5 November 2025 and 31 December 2026, and the position of those who elected an acclimation year in 2025 requires specific consideration.
Why the two measures have to be read together
Until late 2025 the planning advice was straightforward: arrive before 31 December 2025 and keep the reporting exemption. The Temporary Provision has complicated that. A person who arrived in 2025 retains reporting privacy but takes no benefit on Israeli-source income. A person who arrives during 2026 must report worldwide income and assets from the first return, but may exempt a substantial tranche of Israeli salary or business income across five years.
Which is preferable is not a question of principle but of arithmetic, and it turns on the individual’s circumstances: the scale and complexity of foreign holdings, whether those holdings are already visible to the Israeli authorities through automatic exchange in any event, the expected level of Israeli earnings, and the tolerance for disclosure of structures that have not previously been reported anywhere. For an individual with modest foreign assets and a substantial Israeli salary, the 2026 route is likely to be materially better. For an individual with complex trust or corporate structures and limited intended Israeli earnings, the calculation may run the other way — and for that person the 2025 window has closed.
What should be reviewed before residency begins
The practical work sits before arrival rather than after it. Foreign trusts require examination of the settlor and beneficiary positions, since a trust connected to a new immigrant falls within the reporting obligations. Foreign companies require analysis of where they are in fact managed and controlled, because management from Israel engages both substantive and informational consequences. Holdings routed through hybrid vehicles, particularly United States limited liability companies, require attention to classification mismatches that the Tax Authority’s draft guidance addresses expressly.
Beyond structure, the documentary position matters. Reporting requires figures, classifications and currency conversions that must be capable of being produced consistently year after year, and inconsistency between what is reported in Israel and what is reported in a treaty country is the most predictable source of dispute. Where an existing structure would be difficult to explain on a first Israeli return, the time to address it is before residency begins, not in the year the return falls due.
Matters reserved for Israeli tax advice
This article states the framework. It does not determine whether a particular individual qualifies as a veteran returning resident, when the centre of life shifted in any given case, how the acclimation year interacts with either measure on particular facts, or how a specific foreign structure should be classified for Israeli purposes. Those are questions for Israeli-qualified tax counsel. OIKONOMAKIS LAW, together with its partner lawyers in Israel, handles such matters through that collaboration, and the interaction with the individual’s home-country regime — including, for citizens of the United States, obligations that persist regardless of Israeli residency — requires advice in that jurisdiction as well.
Conclusion
The Israeli regime has moved from quiet generosity toward transparent generosity. The benefit is still substantial and, for those earning in Israel, temporarily more substantial than it has ever been. What has ended is the ability to receive it without explaining what one owns. For anyone planning a move during the remainder of 2026, both halves of that trade need to be modelled before the date of arrival is fixed, because once residency begins neither can be renegotiated.
Frequently asked questions
Has the ten-year tax exemption on foreign income been abolished?
No. The exemption from Israeli tax on foreign-source income and gains remains for eligible individuals. What was repealed by Amendment 272 is the separate exemption from reporting that income and those assets.
Who is affected by the reporting change?
Individuals who became Israeli residents on or after 1 January 2026, whether as Israeli residents for the first time or as veteran returning residents. Those who became residents by 31 December 2025 retain the previous position.
What has to be reported?
Worldwide income and foreign assets, including foreign bank and investment accounts, foreign real estate, foreign pension arrangements, foreign companies and trusts, and beneficial ownership in foreign structures.
What does the new 2026 exemption cover?
Israeli-source active income from employment or business, within ceilings of NIS 600,000 for 2026 pro-rated, NIS 1,000,000 for 2027 and 2028, NIS 350,000 for 2029 and NIS 150,000 for 2030. Passive Israeli income is excluded, and income from a related party other than a wholly owned company is capped at NIS 140,000 per year.
Who qualifies for it?
New immigrants under the Law of Return and veteran returning residents who were abroad for at least ten years, who take up Israeli residency between 5 November 2025 and 31 December 2026.
Is it now better to arrive in 2026 than it was to arrive in 2025?
It depends on the individual’s foreign holdings and expected Israeli earnings. The 2026 route brings full reporting but a significant exemption on Israeli income; the 2025 route brought reporting privacy but no such exemption. The comparison should be modelled rather than assumed.
Contact
OIKONOMAKIS LAW advises internationally mobile individuals and their families on cross-border relocation, including review of trusts, holding companies and investment structures before a change of tax residency, coordination between the incoming and outgoing jurisdictions, and instruction of local tax counsel where domestic advice is required. In Israel, OIKONOMAKIS LAW acts together with its partner lawyers, and the firm can handle the matters described in this article through that collaboration. Advice on Israeli law and Israeli taxation is delivered by Israeli-qualified professionals within that arrangement.
Email: leads@oikonomakislaw.com
Tel Aviv office: Menachem Begin 150, WE TLV · Telephone: +972 3 374 1019
oikonomakislaw.com/contact-us/
Disclaimer
This article is provided for information, reflects the position as at the legal review date stated above and does not constitute legal or tax advice on any particular situation. The Tax Authority circular referred to was issued in draft for public comment and its final form should be verified before reliance. Each case depends on its own facts.
Sources
Income Tax Ordinance [New Version] 5721-1961, sections 134B and 135(b), as amended
Amendment 272 to the Income Tax Ordinance, passed 2 April 2024, published 7 April 2024
Amendment 168 to the Income Tax Ordinance (2008), which introduced the exemption now repealed
Law for the Encouragement of Immigration to Israel and Return Thereto (Temporary Provision), 5786-2026, enacted 30 March 2026, Book of Laws 3511, published 31 March 2026
Israel Tax Authority, draft Income Tax Circular on Amendment 272, published for public comment 26 October 2025
Israel Tax Authority — https://www.gov.il/en/departments/israel_tax_authority
Prepared by Christos Oikonomakis, Chairman, OIKONOMAKIS LAW