Income Tax Benefits for Olim — the 2025-2026 Tax Reform

Step-by-Step Instructions

1. 1

   In brief

   A landmark tax reform for new Olim and long-time returning residents has been approved.

   • The reform grants a phased 0% income-tax exemption on earned income for up to 5 years (2026–2030), for those who arrive in Israel between 5 November 2025 and 31 December 2026.
   • Peak-year exemption caps reach ₪1,000,000 per year (2027–2028), tapering down to ₪150,000 in 2030.
   • The exemption applies to earned income only — salary from employment or income from a business — not to rental income, interest, or dividends.
   • The existing benefits are not cancelled — Aliyah tax credit points (nekudot zikkui) and the 10-year foreign-income exemption still apply on top of the new reform.
   • New Olim arriving from 1 January 2026 onwards are subject to a new reporting obligation for income earned outside Israel.

   Official source: Ministry of Aliyah and Integration — 2025-2026 Tax Reform for New Olim (Hebrew).

2. 2

   Who is eligible?

   Two groups qualify for the reform's exemption:

   1. New Olim — those becoming Israeli residents for the first time.
   2. Veteran returning residents (Toshavim Chozrim Vatikim) — Israelis who lived at least 10 years abroad and are now returning to Israel.

   Timing requirement: the person must arrive in Israel — i.e. make Aliyah or return as a veteran returning resident — during the eligibility window: 5 November 2025 → 31 December 2026.

   Those who arrived before 5 November 2025 are not covered by the reform, but retain access to the pre-existing benefits (below).

3. 3

   How much is the exemption — the year-by-year cap table

   The exemption is phased across 5 years. Each year has its own maximum exempt amount of earned income:

   Tax year	Maximum exempt earned income
   2026	Up to ₪600,000
   2027	Up to ₪1,000,000
   2028	Up to ₪1,000,000
   2029	Up to ₪350,000
   2030	Up to ₪150,000

   Income earned above the yearly cap is taxed at the standard rates.

   Working for a family member — if your earned income comes from employment with a close relative, the annual cap is much lower: ₪140,000 per year only. (The original bill offered no exemption at all in this case; the committee revised it to allow this reduced cap.)

4. 4

   What income qualifies (and what doesn't)

   Qualifying — "earned income received from personal exertion" (hachnasah meyaga'a ishit):

   • Salary from employment (as a salaried employee)
   • Business income (as a self-employed person)

   The exemption applies to earned income received in Israel during tax years 2026–2030, up to the yearly caps above.

   Not qualifying — passive income sources:

   • Rental income
   • Accrued interest
   • Dividends

   Passive income is taxed under the standard rules (though the pre-existing 10-year foreign-income exemption may still apply — see below).

5. 5

   When does it take effect and how long does it last?

   Effective date: the reform applies to those who arrived in Israel from 5 November 2025 onwards (Olim or veteran returning residents).

   Duration: the phased exemption runs for up to 5 tax years — 2026 through 2030. The exact number of years and applicable caps depend on the Aliyah/return date. See the year-by-year table in the previous section.

   Note: the eligibility window for new arrivals closes at the end of 2026. Someone arriving after that date will not qualify for the reform's exemption, though pre-existing benefits still apply.

6. 6

   Anti-abuse rule — you must actually stay

   To prevent people from arriving just to claim the exemption and then leaving, the reform includes a residency-continuity requirement:

   • If you cease being an Israeli resident during 2028 or 2029, AND
   • You spent fewer than 75 days in Israel in that same year,

   then the reform's exemption provisions will not apply to you for that year (and potentially retroactively).

   Practical implication: to fully benefit from the reform, plan on genuinely residing in Israel throughout the 5-year window.

7. 7

   Existing benefits are NOT cancelled — what's still in force

   The reform is in addition to, not instead of, the existing Aliyah tax benefits. The following continue to apply:

   Aliyah tax credit points (nekudot zikkui):

   • 1–3 credit points for approximately 4.5 years from the date of Aliyah.
   • Value in monetary terms: roughly ₪3,000–₪9,000 per year (depending on the number of points and the credit-point value in that tax year).

   10-year foreign-income exemption:

   • Full exemption from Israeli income tax on income earned outside Israel — for 10 years from the date of Aliyah.
   • Covers various types of foreign income (salary, business, dividends, interest, capital gains).

   The reform's new 0% earned-income exemption stacks with these — you can benefit from both.

8. 8

   New reporting obligation for arrivals from 2026

   Key change: Olim who arrive in Israel from 1 January 2026 onwards are now required to report on income generated outside Israel to the Israel Tax Authority.

   • The reporting obligation applies even where the income is tax-exempt in Israel under the 10-year foreign-income exemption.
   • This is a compliance/transparency requirement, not necessarily a tax liability.
   • Failure to report can trigger penalties even where no tax is owed.
9. 9

   How to get advice and apply

   The Ministry of Aliyah and Integration's Business Entrepreneurship Division runs a business information call centre dedicated to tax and business matters for Olim and returning residents.

   Contact details (24 hours/day, except Shabbat and Jewish holidays):

   • Phone from Israel: *2994
   • Phone from abroad: +972-3-9733333
   • Email: infobiz@014.net.il

   Related services:

   • Request a tax + entrepreneurship consultation meeting
   • Apply for an Adjustment Year (Shnat Hasta'agalut) — the year of grace where you can defer the tax-residency clock
   • Income Tax guide for Olim and Returning Residents
10. 10

    Helping organisations

    Government hotlines:

    Organisation	Phone
    Ministry of Aliyah and Integration (Misrad HaKlita) — Business Info Centre	*2994
    Israel Tax Authority (Rashut HaMisim)	*4954
    Sh'il (Citizens' Advice Service)	118
    Central Government Response Centre	1299