Taxation of New Immigrants and Returning Residents

New immigrants (olim) and veteran returning residents are exempt from tax for 10 years on income generated outside Israel (Section 14 of the Income Tax Ordinance) and on capital gains from the sale of foreign assets. In 2026, two things changed: anyone who became a resident from January 1, 2026 is required to report such income, and anyone who became a resident between November 5, 2025 and the end of 2026 may also benefit from an exemption on employment income earned in Israel. Tell us when you arrived or when you plan to arrive, and we will determine which status and exemptions you are entitled to.

Ideally before you arrive, but even afterward there are situations where it pays to stop and check:

• You are planning to make Aliyah or return to Israel and want to know whether you will be classified as a new immigrant, a veteran returning resident, or a regular returning resident.

• You arrived in late 2025 or in 2026, and it is unclear from which day you became a resident — and therefore whether Amendment 272 and the temporary provision apply to you. The determining factor is the date of residency, not necessarily the date of landing.

• You continue to work from Israel for a foreign employer, or you manage a foreign company from here.

• You have a foreign trust, as a settlor or as a beneficiary.

• You received stock options or RSUs while you were a foreign resident, and they vest after your arrival.

• Your 10-year exemption period is ending soon, and you have foreign assets you are considering selling.

The benefits depend on your status, and your status depends on how long you were a foreign resident before you arrived:

• New immigrant (oleh): A person who became an Israeli resident for the first time. Exempt for 10 years on income produced or accrued outside Israel, including employment and business income abroad, and on capital gains from the sale of foreign assets.

• Veteran returning resident: A person who was a foreign resident for at least 10 consecutive years. Entitled to the same exemptions as a new immigrant, for the same period.

• Returning resident: A person who was a foreign resident for at least 6 consecutive years. Exempt for 5 years on passive income — such as interest, dividends, pensions, royalties, and rental income — from foreign assets acquired while a foreign resident, and exempt for 10 years on capital gains from the sale of those assets. Employment income from abroad is not exempt.

New immigrants and veteran returning residents may request an adjustment year, during which they will not be considered Israeli residents for tax purposes. The request must be filed within 90 days of arrival. The adjustment year counts toward the 10-year exemption period and does not extend it (Section 14(b)(2) of the Ordinance). Regular returning residents are not eligible for an adjustment year.

In 2026, two changes apply to new immigrants and veteran returning residents: anyone who arrived from January 1, 2026 is required to report foreign income and assets (Amendment 272), and anyone who arrived between November 5, 2025 and the end of 2026 may be exempt from tax on employment or business income earned in Israel, up to an annual ceiling.

Amendment 272: Reporting Obligation for Those Who Arrived from January 1, 2026

Until the end of 2025, new immigrants and veteran returning residents were exempt from both tax and reporting on their foreign income and assets for 10 years. Amendment 272 to the Ordinance, enacted in 2024, revoked the reporting exemption under Sections 134B and 135(b) for anyone who became a new immigrant or veteran returning resident from January 1, 2026. Those who arrived since then must file annual tax returns and wealth declarations that include their foreign assets and income, even when the income is tax-exempt. The amendment also revoked the reporting exemption for trusts where the settlor or beneficiary arrived from 2026, as discussed on the Trusts and Family Wealth Management. Details on reporting requirements for foreign accounts and assets are explained on the Foreign Bank Accounts and Assets: Reporting and Compliance.

Encouragement of Aliyah Law (Temporary Provision), 5786-2026

Under the Encouragement of Aliyah to Israel and Return Thereto Law (Temporary Provision), new immigrants and veteran returning residents who became Israeli residents between November 5, 2025 and December 31, 2026 are exempt from tax on personal-effort income — i.e., salary or business income — earned in Israel. The exemption is subject to an annual ceiling:

• 2026: up to ILS 600,000, prorated for the portion of the year during which you were a resident.

• 2027 and 2028: up to ILS 1,000,000 per year.

• 2029: up to ILS 350,000.

• 2030: up to ILS 150,000.

For income received from a family member, the ceiling for 2026 through 2029 is ILS 140,000 per year. A new immigrant must hold an immigrant visa, immigrant certificate, or entitlement to an absorption basket, and a veteran returning resident must hold a certificate from the Ministry of Aliyah and Integration. The law does not apply to regular returning residents. Anyone who terminates their Israeli residency in 2028 or 2029 and spends fewer than 75 days in Israel that year loses the exemption retroactively. The Israel Tax Authority published its implementation guidelines in Income Tax Circular 07/2026.

Options and RSUs from a Foreign Employer

Under Income Tax Circular 9/2025, income from the exercise of options and RSUs received while you were a foreign resident is spread in equal portions over the tax years from the grant date to the exercise date, up to a maximum of 6 years. The portion allocated to years in which you were a foreign resident is exempt from Israeli tax, and the portion allocated to years in which you were already a resident is taxable. The working days in each country during the vesting period determine which portion was generated abroad, and consequently the foreign tax credit and the exemption available to new immigrants and veteran returning residents. Therefore, for a new immigrant or veteran returning resident, if vesting was completed before arrival, the entire income is considered foreign-source income and is exempt. Full details are on the Employee Stock Option Taxation.

These are the points at which the exemption is tested in practice:

• Work physically performed in Israel constitutes income produced in Israel, and the Section 14 exemption does not apply to it — even when the employer is foreign and the salary is paid abroad. Those eligible under the temporary provision are exempt only up to the applicable ceiling.

• A foreign company that you manage from Israel is not considered an Israeli resident during the 10-year period, provided it would not have been a resident even without your management. Since Amendment 272, the assessing officer may require it to file returns, so it is advisable to document the management from the very first year.

• The exemption does not apply to income from an asset received as a gift from January 1, 2007, where the donor was exempt from tax on that income.

1. Before arrival, we determine your expected status and the date on which you will become a resident, and assess whether it is worthwhile to request an adjustment year. You bring passports, departure and entry dates, and — if eligible — the certificate from the Ministry of Aliyah and Integration.

2. We map all foreign assets and income: accounts, companies, trusts, real estate, stock options, and assets received as gifts, and identify what is exempt and what is not.

3. In the first year, we prepare the annual tax return. Those who arrived from 2026 report their foreign income and assets in the return, and those working in Israel verify that the exempt income under the temporary provision has not exceeded that year's ceiling.

4. Throughout the period, we update the picture whenever something changes — for example, a new job, the sale of an asset, or managing a company from Israel.

5. About one to two years before the end of the 10-year period, we review which foreign assets are worth selling or restructuring before the exemption expires.

Cases involving new immigrants and returning residents at the firm are handled by Adv. and CPA Shlomi Vaknin and his team. Shlomi has been a certified public accountant since 2000 and an attorney since 2008. He served for nearly a decade as a national supervisor in the professional division of VAT at the Israel Tax Authority and spent 18 years as a senior partner at a tax law firm before establishing his own practice in 2024. In these cases, the determination of status and residency is directly linked to the annual tax return, and both aspects are handled under his supervision.