IL New Immigrant

Quick reference

Quick reference

Item	Value
Exemption period	10 years from the date of becoming an Israeli tax resident
Who qualifies	New immigrants (olim) and returning residents (who were non-resident for ≥ 10 years)
Foreign income covered	Exempt from Israeli tax for 10 years
Foreign capital gains	Exempt from Israeli tax for 10 years
Israeli-source income	Taxed in the normal way from day one
Legislation	Income Tax Ordinance (ITO), §14(a) and §97(b)
Tax authority	Israel Tax Authority (ITA) — taxes.gov.il

Who qualifies

• New immigrant (עולה חדש / oleh) — Any person who becomes an Israeli resident for the first time (immigrates to Israel).
• Returning resident (תושב חוזר) — An Israeli citizen or former resident who: Was a non-resident of Israel for at least 10 consecutive years, AND Returns to reside in Israel
• Senior returning resident — A 'senior returning resident' (absent for 6+ years but less than 10) gets a shorter 5-year exemption on foreign income.

What the exemption covers

What the exemption covers

Income type	Treatment
Foreign employment income (salary from non-Israeli employer)	Exempt
Foreign business income	Exempt
Foreign dividends and interest	Exempt
Foreign capital gains (shares, property abroad)	Exempt
Foreign rental income	Exempt
Israeli-source income (salary from Israeli employer, Israeli business)	Taxed normally
Israeli capital gains	Taxed normally

For the full 10-year period from the date of immigration/return:

How to claim the exemption

• Automatic exemption — The exemption is automatic — no election or filing is required to benefit from it. New immigrants and qualifying returning residents simply do not report their foreign income on their Israeli tax return during the exemption period.
• Election to be taxed — Alternatively, the individual can elect to be taxed on foreign income (useful if they want to use foreign tax credits against Israeli tax, or for other reasons). This election is irrevocable once made.

Practical considerations

1. Israeli employer payroll: if you work for an Israeli employer, your salary is Israeli-source income — taxed at normal rates regardless of the exemption.

2. Foreign company salary paid abroad: if you work for a non-Israeli company and are paid into a foreign account, this is foreign-source and exempt.

3. Capital gains: sell foreign shares during the exemption period → exempt. Sell Israeli shares or Israeli real property → taxed normally.

4. Trusts and foundations: foreign trusts and foundations held by new immigrants also receive special treatment during the exemption period.

5. The 10-year clock: starts on the date of becoming an Israeli tax resident (registration of aliyah / return). Track this date precisely.

Israel capital gains rates (for Israeli-source income)

Israel capital gains rates (for Israeli-source income)

Asset type	Rate
Listed shares (bought after 1 Jan 2012)	25% (or 30% if >10% shareholder)
Unlisted shares	25% (or 30% if >10% shareholder)
Real property — residential	Complex (betterment levy, linear calculation)
Inflation adjustment	Available (reduces the real gain)

Sources

• Income Tax Ordinance [New Version], §14(a) (new immigrants and returning residents)
• ITO §97(b) (capital gains exemption for new immigrants)
• Israel Tax Authority: taxes.gov.il
• ITA Circular: guidance on returning residents

Working paper only. The interaction of the exemption with Israeli payroll (if employed by an Israeli employer) and with trust structures is complex. Have a qualified Israeli CPA (רואה חשבון) review before making employment or asset decisions.