Israel’s ten-year tax exemption for new immigrants is one of the most generous immigration incentives of any country in the world. For the right person, it can mean a decade of tax-free foreign income, capital gains, and investment returns while building a life in Israel. For the wrong person — or someone who doesn’t plan properly — it can create unexpected obligations and missed opportunities.

This guide explains how the exemption works, who qualifies, what it covers, and what you need to do before it ends.

What is the ten-year tax exemption?

The ten-year tax exemption exempts new immigrants (Olim Hadashim) and certain returning residents (Toshavim Chozrim) from paying Israeli taxes on income and assets sourced outside of Israel for a period of ten years from the date of aliyah. It was introduced as part of Israel’s 2008 tax reform and remains one of the country’s primary tools for attracting skilled professionals and easing the financial transition to Israeli life.

The core principle: during your ten-year exemption period, Israel treats your foreign income and assets as if you were still a non-resident for tax purposes — even though you are now a full Israeli citizen and resident.

Who qualifies?

To be eligible for the exemption, you must be one of the following:

  • Oleh Hadash (New Immigrant): Anyone immigrating to Israel for the first time under the Law of Return. The exemption begins on your official aliyah date.
  • Returning Resident (Toshav Chozer): An Israeli citizen who lived outside Israel for at least ten consecutive years and is now returning. The exemption begins on your official return date.
  • Senior Returning Resident: An Israeli citizen who lived outside Israel for at least six consecutive years (a lesser-known category with a shorter exemption period — consult a tax advisor for details).

What does the exemption cover?

Foreign-sourced income

Any income earned from employment, freelance work, business activity, royalties, or professional services performed outside Israel is completely tax-free in Israel during the exemption period. This applies whether the income is transferred to Israel or kept abroad — the source of the income, not where the money sits, is what matters.

Passive income from foreign assets

Interest, dividends, and rental income generated from foreign investments, bank accounts, or properties are all exempt. If you own a rental property in the US, UK, or France and collect rent while living in Israel, that rental income is not taxable in Israel during your exemption period.

Capital gains on foreign assets

Profits from the sale of foreign assets — stocks, property, businesses — are exempt from Israeli capital gains tax for ten years, provided the assets were purchased before your aliyah date. This is particularly significant for business owners and investors who may be planning to sell assets in the years following their move.

Note: assets purchased after your aliyah date but outside Israel may still be covered — the rules here are nuanced and depend on timing and asset type. A tax professional should review your specific situation.

Foreign corporations

If you own or control a foreign company, it will generally not be considered an Israeli tax resident during your exemption period, even if you are actively managing it from Israel. This means the company’s profits are not subject to Israeli corporate tax during the ten years. After the exemption period ends, the company may be reclassified as an Israeli resident if it is effectively managed from Israel — this requires advance planning.

What the exemption does NOT cover

Israeli-sourced income

The exemption applies only to foreign income. Any salary, freelance income, business revenue, or investment returns generated inside Israel are fully subject to standard Israeli income tax from day one. If you take a job with an Israeli employer, that salary is taxable regardless of your exemption status.

Bituach Leumi (National Insurance)

The tax exemption does not cover Israeli social security contributions. Bituach Leumi obligations depend on your income sources and residency status and apply independently of the tax exemption. This is a common source of confusion — confirm your Bituach Leumi obligations with an accountant early.

VAT

If you run a business in Israel, VAT obligations apply normally from the start. The income tax exemption does not affect VAT registration or payment requirements.

Reporting requirements

A critical and frequently misunderstood point: the exemption relieves you from paying Israeli tax on foreign income, but it does not necessarily relieve you from reporting it. Israel’s Tax Authority (Misrad HaOtzar) requires annual income reporting from most residents. Failure to file, even when no tax is owed, can result in penalties.

In practice, many new olim are exempt from filing requirements in their early years — but this depends on your income level and sources. Confirm your specific filing obligations with an Israeli accountant in your first year.

Special considerations for American olim

Americans face a unique complication: the US taxes its citizens on worldwide income regardless of where they live, which means American olim are subject to both Israeli and US tax systems simultaneously. The ten-year exemption removes Israeli tax on foreign income, but US tax obligations remain.

The US-Israel tax treaty and the Foreign Earned Income Exclusion (FEIE) help reduce double taxation in many cases, but the interaction between Israeli exemption status and US filing requirements is complex. Americans with significant foreign income, foreign bank accounts, or foreign business interests should work with an accountant who understands both systems. See our US tax planning guide for Americans buying Israeli real estate for more on the American-specific picture.

Planning for the end of the exemption

Ten years passes faster than expected, and the transition from exempt to fully taxable status can be significant — particularly for business owners, investors, and anyone with substantial foreign income. Planning should begin at least two to three years before the exemption ends.

Key steps to take before your exemption expires

  • Audit your foreign assets and income: Get a clear picture of everything that will become taxable — foreign accounts, investment portfolios, rental properties, business interests.
  • Consider timing asset sales: If you’re planning to sell foreign assets, doing so before the exemption ends may save significant capital gains tax. The difference between selling one year before and one year after can be substantial.
  • Review your foreign company structure: If you own a foreign company managed from Israel, it may need restructuring before the exemption ends to avoid being reclassified as an Israeli tax resident.
  • Understand Israel’s tax treaties: Israel has tax treaties with over 50 countries designed to prevent double taxation. Understanding how your home country’s treaty applies to your specific income sources can reduce your post-exemption tax burden significantly.
  • Engage a tax advisor early: The planning window matters. An Israeli tax professional with international expertise should review your situation at least 2–3 years before the exemption ends, not in the final months.

Common questions

Does the exemption apply if I work remotely for a foreign employer from Israel?

Generally yes — if your employer is foreign and the work is considered foreign-sourced, the income is typically exempt during your ten years. However, the classification of remote work income can be complex, particularly if your employer has any Israeli presence. Confirm with a tax advisor.

What if I leave Israel and come back during the ten years?

Temporary absences generally do not interrupt the exemption period. The ten years runs from your official aliyah date regardless of travel. However, extended absences that raise questions about your Israeli residency status could have implications — get advice if you spend significant time abroad.

Can I invest in Israeli stocks or real estate and still benefit from the exemption?

Israeli-sourced investment returns are not covered by the exemption. Gains from Israeli stocks, Israeli rental income, and Israeli bank interest are all subject to standard Israeli tax. The exemption covers only foreign-sourced income and assets.

Has the government ever considered changing or removing the exemption?

There have been periodic political discussions about reforming or limiting the exemption, particularly around whether very high earners should receive the full benefit. As of 2026, no significant changes have been legislated, but the political environment should be monitored — particularly for olim in their mid-exemption years who may be affected by future reforms.

Bottom line

The ten-year tax exemption is a genuinely significant financial benefit — for the right person, it can mean hundreds of thousands of dollars in tax savings over a decade. But it requires active management: understanding what’s covered, meeting your reporting obligations, and planning seriously for the transition when it ends.

The single most important step is finding an Israeli accountant with international tax experience in your first year. The exemption is valuable; leaving money on the table through poor planning, or creating problems through non-compliance, is avoidable with the right advice.

If you’re in the process of buying property in Israel, see our complete guide to buying property in Israel and our 2026 arnona rates guide for the other financial factors that affect your cost of ownership.

Looking to buy property in Israel as part of your aliyah? Talk to one of our English-speaking agents →