Complete Guide to Olim Tax Benefits & Israeli

Taxation

 Critical Disclaimer

Tax law is complex and changes frequently. This guide provides general information but is NOT professional tax advice.

You should:

ï           Consult a qualified Israeli tax advisor (חשבון רואה)

ï           Especially important if you have: Foreign income, assets, investments, business

ï           Get professional help BEFORE making major financial decisions

ï           File correctly from the start (fixing mistakes is expensive)

This guide helps you understand the basics and ask the right questions.

The Amazing Olim Tax Benefits (10 Years!)

Overview: Why Israel is Tax-Friendly for New Immigrants

Israel offers **extremely generous tax benefits **to encourage aliyah:

10-Year Benefit Period for:

ï           Foreign income (passive)

ï           Foreign assets

ï           Foreign pensions

ï           Capital gains abroad

ï           Certain foreign employment income

Why So Generous:

ï           Encourage aliyah (immigration)

ï           Help with transition period

ï           Recognize dual tax obligations

ï           Attract skilled immigrants

ï           Economic benefit to Israel

The Deal:

ï           Israeli-source income: Taxed normally from day one

ï           Foreign-source income: Tax benefits for 10 years

ï           After 10 years: Global taxation begins

The 10-Year Oleh Tax Benefits (Detailed)

Who Qualifies

Eligible:

ï           New olim (made aliyah after age 18)

ï           Returning residents (lived abroad 10+ consecutive years)

ï           Starts from tax year of aliyah

Not Eligible:

ï           Born in Israel (never left)

ï           Left Israel recently (under 10 years ago)

ï           "Resident returning resident" (complex rules)

What's Exempt (Years 1-10)

100% Tax Exempt:

1.  Foreign Passive Income (והצמדה ריבית דמי)

ï           Interest from foreign bank accounts

ï           Dividends from foreign stocks

ï           Foreign rental income (with conditions)

ï           Foreign pension distributions (most types)

ï           Capital gains on foreign assets

ï           Cryptocurrency gains (if held abroad)

2.  Foreign Assets

ï           No wealth tax in Israel anyway, but...

ï           No reporting requirement for foreign assets

ï           No disclosure to Israeli tax authority

ï           Privacy protected

3.  Certain Foreign Employment Income

ï           If work for foreign company

ï           Outside Israel

ï           Paid to foreign account

ï           Varies by circumstance - consult accountant

Important Nuances:

ï           Must not be Israeli-source income

ï           Proper structure matters

ï           Documentation essential

ï           Gray areas require professional advice

What IS Taxed (Even for Olim)

Israeli-Source Income (Always Taxed):

ï           Israeli employment (salary, wages)

ï           Israeli business income

ï           Israeli rental income

ï           Israeli bank interest (minimal nowadays)

ï           Israeli dividends

ï           Israeli capital gains (stocks, real estate)

ï           Freelance work performed in Israel (even for foreign clients)

**The Rule: **If earned/sourced in Israel → Taxed in Israel (no benefits)

Timeline: What Happens After 10 Years

Year 11 Onwards:

ï           Foreign passive income: Now taxable

ï           Foreign assets: May need reporting

ï           Foreign pensions: Taxable (usually reduced rate)

ï           Capital gains: Taxable on sales after year 10

ï           Double tax treaties still apply (avoid double taxation)

ï           Foreign tax credits available

Planning for Year 11:

ï           Start planning in year 8-9

ï           Consider timing of asset sales

ï           Restructure investments if beneficial

ï           Consult tax advisor well in advance

Israeli Tax System Basics

**Tax Residency - Are You an Israeli Tax Resident? Critical Concept: **Tax residency ≠ citizenship or visa status **You ARE Israeli Tax Resident If: **Either:

**1.        Center of Life Test: **Israel is your center of vital interests (family, economic, social ties) OR

**2.        183-Day Test: **Spent 183+ days in Israel in tax year (or 425+ days over current + 2 prior years)

Consequences of Tax Residency:

ï           Must file Israeli tax return

ï           Israeli income always taxed

ï           Foreign income: Depends on oleh status and type

ï           Subject to Israeli tax laws

**Important: **Can be tax resident in multiple countries! (But treaties prevent double taxation)

Tax Year

Israeli Tax Year = Calendar Year

ï           January 1 - December 31

ï           Different from fiscal year (for businesses)

ï           File by April 30 following year (employees)

ï           Extensions available

Income Tax Brackets (2025)

Progressive Tax System:

Tax Credit Points (זיכוי נקודות):

ï           Each point worth ~₪2,712/year (2025)

ï           Basic: 2.25 points (₪6,102 credit)

ï           Additional points for: Children, disabilities, etc.

ï           Reduces tax owed

Effective Rate:

ï           Much lower than marginal rate due to progressive system

ï           Example: ₪200,000 income → ~20-25% effective rate

National Insurance (Bituach Leumi - לאומי ביטוח)

Social Security Tax (Not Optional!): For Employees:

ï           3.5% - 12% of salary (progressive)

ï           Employer also pays ~7.6%

ï           Caps at certain income levels

For Self-Employed:

ï           ~17-18% of income

ï           Includes health insurance component

ï           Must pay quarterly

What It Covers:

ï           Health insurance

ï           Unemployment

ï           Maternity/paternity

ï           Disability

ï           Old age pension

ï           Child allowances

**Important: **Separate from income tax, but collected together

Types of Income & Taxation

Employment Income (שכר)

Taxed At Source:

ï           Employer withholds income tax

ï           Plus Bituach Leumi

ï           Monthly payslip shows deductions

ï           Most employees don't need to file (if only income source)

**Tax Points (זיכוי נקודות): **Report to employer:

ï           Marital status

ï           Number of children

ï           Other relevant factors

ï           More points = less withholding

Year-End Reconciliation:

ï           Form 106 (end of year)

ï           Employer sends to tax authority

ï           Automatic refund if overpaid

ï           Or bill if underpaid

Self-Employment Income (עצמאי)

More Complex:

ï           Report all income

ï           Deduct business expenses

ï           Pay quarterly estimated tax

ï           Annual reconciliation

ï           Require accountant! Tax Rate:

ï           Same income tax brackets

ï           Plus ~17-18% Bituach Leumi

ï           Effective rate higher than employees

Deductions Allowed:

ï           Office expenses

ï           Equipment

ï           Professional development

ï           Travel for business

ï           Home office (percentage)

ï           Professional services

ï           Much more - ask accountant

Quarterly Payments:

ï           Advance tax payments required

ï           Based on prior year or estimates

ï           Avoid penalties by paying enough

Rental Income (משכירות הכנסה)

Israeli Rental Property:

Two Options:

Option 1: 10% Flat Rate

ï           Pay 10% of gross rent

ï           No deductions allowed

ï           Simple

ï           Good if low expenses

Option 2: Marginal Rate with Deductions

ï           Pay at your marginal rate

ï           Deduct: Mortgage interest, arnona, repairs, management

ï           Complex

ï           Better if high expenses or low income

Foreign Rental Property:

ï           Exempt for olim (10 years)

ï           After 10 years: Taxable

ï           Foreign tax credits apply

Investment Income

Israeli Stocks/Funds:

ï           Dividends: 25-30% withholding (final tax)

ï           Capital gains: 25% (some exceptions)

ï           Withheld at source usually

Foreign Stocks/Funds (Olim):

ï           Years 1-10: Tax exempt!

ï           Keep good records

ï           After year 10: 25-30% generally

Crypto (Complex!):

ï           Gains taxable if "business-like" activity

ï           Olim benefit applies if held abroad

ï           Keep detailed records

ï           Consult specialist if significant

Pension Income

Israeli Pensions:

ï           Taxable at marginal rate

ï           Tax credits reduce burden

ï           Often preferential treatment

Foreign Pensions:

ï           Exempt for olim (10 years!)

ï           After year 10: Taxable but usually reduced rate

ï           Treaty provisions apply

ï           Social Security (US): Special rules

**Important: **Structure matters - lump sum vs. annuity treated differently

Double Taxation Agreements

What Are Tax Treaties?

Purpose:

ï           Prevent double taxation

ï           Determine which country taxes what

ï           Provide foreign tax credits

ï           Define tax residency (tiebreaker rules)

Israel Has Treaties With:

ï           US, UK, Canada, Australia, France, Germany

ï           Most European countries

ï           Many others (60+ countries)

ï           Check: www.taxes.gov.il

How They Work Example: US-Israel Treaty Salary:

ï           Generally taxed where work performed

ï           If work in Israel → Israel taxes (even for US company)

ï           If work in US → US taxes primarily

Pensions:

ï           Often taxed in residence country

ï           Some types taxed in source country

ï           US Social Security: Special provisions

Investment Income:

ï           Withholding tax limits

ï           Dividends: Usually 25% max

ï           Interest: Often 10-15% max

ï           Capital gains: Usually residence country

Foreign Tax Credits:

ï           If pay tax in both countries

ï           Credit in residence country for foreign tax paid

ï           Prevents actual double taxation

Key Concepts

**Tie-Breaker Rules: **If tax resident in both countries:

1.        Permanent home location
2.        Center of vital interests
3.        Habitual abode
4.        Nationality
5.        Mutual agreement

**Usually: **If live in Israel full-time → Israeli tax resident (even if US citizen)

Filing Requirements

Who Must File in Israel

Required to File:

ï           Self-employed (always)

ï           Multiple income sources

ï           Rental income

ï           Significant investment income

ï           Foreign income (if claiming exemption)

ï           Tax authority requests

May Not Need to File:

ï           Single employer

ï           Only employment income

ï           Employer filed Form 106

ï           No other income

**Best Practice: **File anyway if any complexity or to claim refunds

Annual Tax Return (שנתי ח"דו)

Deadline:

ï           April 30 (following tax year)

ï           Extensions available (request by deadline)

ï           Extended deadline typically June-December

Forms:

Form 1301 - Annual Return

ï           Main form

ï           Report all income

ï           Claim deductions

ï           Calculate tax due/refund

Supporting Forms:

ï           Income from various sources

ï           Deductions and credits

ï           Foreign income schedules

ï           Many others as needed

Filing Methods:

ï           Online: Tax authority website (עצמית שומה)

ï           Through accountant (recommended)

ï           At tax office (not recommended - busy)

Language:

ï           Forms in Hebrew

ï           Accountant essential for most olim

Record Keeping

What to Keep (7 Years!):

ï           Pay stubs

ï           Tax forms (Form 106, etc.)

ï           Bank statements

ï           Investment statements

ï           Rental agreements

ï           Business expense receipts

ï           Foreign income documentation

ï           Foreign tax payment proof

Why 7 Years:

ï           Audit period

ï           Tax authority can review back 7 years

ï           Keep organized from day one

Tax Credits & Deductions

Tax Credit Points (זיכוי נקודות)

Each point reduces tax by ~₪2,712/year (2025) Standard Credits:

ï           Basic personal: 2.25 points

ï           Spouse (if no income): 2.25 points

ï           Each child: 1-4 points (depends on number)

ï           Single parent: 1 additional point

ï           New immigrant: 1 additional point (first 3.5 years)

ï           Woman: 0.5 additional point

Special Credits:

ï           Disabled: 1-9 points (by severity)

ï           Elderly: Additional points

ï           Resident of periphery: 1-4 points

ï           Reservist: Variable

ï           Yeshiva student: Complex rules

How to Claim:

ï           Report to employer (form)

ï           Include in annual return

ï           Automatic if file properly

Common Deductions

Pension Contributions:

ï           Up to limits (varies by age)

ï           Reduces taxable income

ï           Often most significant deduction

Study Funds (Keren Hishtalmut):

ï           Savings fund

ï           Tax-deferred growth

ï           Limits apply

Charitable Donations:

ï           Israeli charities (registered)

ï           Up to 30% of income

ï           Keep receipts (form 46)

ï           Need proper documentation

Union Dues:

ï           Professional union membership

ï           Full deduction

Life Insurance:

ï           Limited deduction

ï           Specific conditions

Moving Expenses (Olim):

ï           First year

ï           Must be reasonable

ï           Keep receipts

Advanced Education:

ï           Sometimes deductible

ï           Must relate to current profession

ï           Strict conditions

Medical Expense Deductions

Deductible After Threshold:

ï           Exceed 2.5% of annual income

ï           Then deduct excess

Qualified Expenses:

ï           Doctor visits (private)

ï           Hospital co-pays

ï           Medications (over co-pay)

ï           Dental

ï           Eyeglasses

ï           Medical equipment

ï           Fertility treatments

ï           Travel to medical care

Keep ALL receipts!

ï           Can add up significantly

ï           Especially with chronic conditions

ï           Check eligibility before paying

Special Situations

Real Estate Taxation

Israeli Real Estate:

Appreciation Tax (שבח מס):

ï           On sale of property

ï           25% of profit (usually)

ï           Exemptions: Primary residence (conditions apply)

ï           Purchase tax on buying (separate)

Primary Residence Exemption:

ï           One primary home exempt

ï           Must meet criteria (size, use, ownership period)

ï           Partial exemption if conditions partially met

ï           Complex - consult accountant before selling

Rental Income:

ï           See earlier section

ï           10% flat or marginal with deductions

Foreign Real Estate (Olim):

ï           Sales: Exempt years 1-10

ï           After year 10: Taxable (25%)

ï           Foreign tax credits apply

ï           Document foreign taxes paid

Starting a Business Business Structure Options: Sole Proprietor (עצמאי):

ï           Simplest

ï           No separate entity

ï           Personal liability

ï           Report on personal return

Company (מ"בע חברה):

ï           Separate entity

ï           Limited liability

ï           Corporate tax (~23%)

ï           Dividend tax on distribution

ï           More complex/expensive

ï           Worth it if significant income

Partnership (שותפות):

ï           Multiple owners

ï           Pass-through taxation

ï           Each partner pays individually

Which to Choose:

ï           Depends on income level, liability, plans

ï           Under ₪500K/year revenue: Often sole proprietor

ï           Higher: Consider company

ï           Consult accountant BEFORE starting

Working Remotely for Foreign Company

Complex Gray Area!

Key Questions:

1.        Where is work physically performed?
2.        Who is the client/employer?
3.        Where is payment sent?
4.        What's the contract structure?

General Rules:

ï           Work performed in Israel → Israeli tax

ï           Even if paid to foreign account

ï           Even if foreign employer

ï           "Source" is where work done

Oleh Benefits May Not Apply!

ï           Employment income different from passive

ï           Physical presence matters

ï           Consult accountant for your specific situation

Proper Structure Matters:

ï           Employee vs. contractor

ï           Company owned vs. personal

ï           Payment routing

ï           Contract terms

ï           Get advice BEFORE starting work

Investments & Trading

Passive Investment:

ï           Buy and hold stocks

ï           Long-term

ï           Capital gains: 25% (Israeli), exempt foreign (olim)

ï           Dividends: 25-30%

Active Trading:

ï           Frequent buying/selling

ï           May be classified as "business"

ï           Higher tax rates apply

ï           Definite business if leveraged/derivatives

ï           Keep detailed records

Crypto (Cryptocurrency):

ï           Gains taxable if business-like

ï           Holding: May be capital gains (25%)

ï           Trading: May be business income (higher)

ï           Olim benefit: Applies if truly foreign-sourced

ï           Very complex - get specialist advice

Foreign Investment Platforms:

ï           Olim: Usually exempt (10 years)

ï           Documentation important

ï           Platform may withhold (US: 30%)

ï           Reclaim through tax return if treaty

US Citizens Special Issues

FATCA & FBAR Reporting

US Citizens Must Report:

FBAR (FinCEN Form 114):

ï           If foreign accounts total $10K+ at any time

ï           File by April 15 (auto extension to October)

ï           Includes: Israeli bank accounts, investment accounts

ï           File even if no tax owed

ï           Severe penalties for non-filing

ï           www.fincen.gov FATCA (Form 8938):

ï           Higher thresholds ($200K-600K depending)

ï           IRS form with tax return

ï           More detailed than FBAR

ï           Overlaps with FBAR but separate requirement

Important:

ï           Even if no US tax owed (foreign earned income exclusion)

ï           Must still file US return

ï           AND Israeli return

ï           Professional help essential

US-Israel Tax Treaty

Key Provisions:

Social Security:

ï           Totalization agreement

ï           Pay in one country only (where working)

ï           Benefits count time in both

ï           US Social Security: Taxable in US primarily, exempt Israel (olim)

Pensions:

ï           Generally taxable in residence country

ï           US 401(k), IRA: Israel can tax (after year 10)

ï           Foreign tax credits prevent double tax

Investment Income:

ï           US typically withholds 30%

ï           Treaty reduces to 15% (dividends)

ï           10% (interest, sometimes)

ï           File W-8BEN to get treaty rates

ï           Credit on Israeli return for US tax paid

Foreign Earned Income Exclusion (US)

FEIE (~$120K for 2025):

ï           Exclude foreign earned income from US tax

ï           Must qualify (physical presence or bona fide residence)

ï           File Form 2555

ï           Reduces/eliminates US tax on salary

ï           Still pay Israeli tax

ï           Still file US return

Important:

ï           Complex calculations

ï           Foreign housing exclusion additional

ï           US CPA familiar with expat issues essential

Renouncing US Citizenship

Tax Consequences:

ï           Exit tax on unrealized gains (if over thresholds)

ï           Complex and permanent

ï           Consult both US CPA and immigration attorney

ï           Consider carefully - irreversible

Common Mistakes to Avoid

 Mistake 1: Not Getting Professional Help

**Problem: **DIY tax return with complex situation **Consequence: **Errors, missed benefits, penalties

**Solution: **Hire qualified Israeli accountant (חשבון רואה)

 Mistake 2: Assuming Oleh Benefits Apply to Everything

**Problem: **Think all foreign income exempt **Reality: **Only passive income and foreign pensions

**Solution: **Understand what's covered, what's not

  Mistake 3: Not Keeping Records

**Problem: **No documentation for income, expenses, foreign taxes **Consequence: **Can't prove claims, lose deductions **Solution: **Organize from day one, keep 7 years

 Mistake 4: Missing Filing Deadlines

**Problem: **Late filing **Consequence: **Penalties, interest, complications **Solution: **File on time or request extension before deadline

 Mistake 5: Incorrect Tax Residency Determination

Problem: **Think not Israeli resident (but are) **Consequence: **Unfiled returns, penalties **Solution:

Understand residency tests, consult professional

 Mistake 6: Not Planning for Year 11

**Problem: **Assume benefits last forever **Reality: **End after 10 years **Solution: **Plan starting year 8, restructure if needed

 Mistake 7: Mixing Personal & Business (Self-Employed)

**Problem: **No separation of personal/business finances **Consequence: **Audit issues, lose deductions

**Solution: **Separate bank accounts, meticulous records

 Mistake 8: Ignoring Home Country Obligations (US, etc.)

**Problem: **Think Israeli tax filing enough **Reality: **May still need to file in original country

**Solution: **Know your obligations in both countries

 Mistake 9: Not Claiming All Tax Credits/Deductions

**Problem: **Leave money on table **Solution: **Work with accountant to maximize benefits

 Mistake 10: Selling Assets Without Tax Planning

**Problem: **Sell foreign property in year 11 (taxable) **Better: **Sell in year 9 (exempt) **Solution: **Time major transactions strategically

Finding Professional Help

When You NEED an Accountant

Absolutely Necessary If:

ï           Self-employed/business owner

ï           Foreign income or assets

ï           Rental income

ï           Complex investments

ï           US citizen (or another country with worldwide taxation)

ï           Multiple income sources

ï           Any complexity beyond simple employment

Nice to Have Even If:

ï           Simple situation

ï           Want peace of mind

ï           Maximize deductions

ï           First year in Israel

Worth the Cost:

ï           Accountant fees: ₪2,000-10,000/year typically

ï           Saves you: Time, stress, money (often more than cost)

ï           Prevents: Costly mistakes, penalties

How to Find a Good Accountant

Sources:

ï           Nefesh B'Nefesh recommendations

ï           AACI accountant directory

ï           Other olim referrals

ï           Online searches: "English-speaking accountant Israel"

ï           Professional associations

Questions to Ask:

ï           Experience with olim?

ï           Familiar with [your country] tax treaty?

ï           English-speaking?

ï           How many clients?

ï           Availability?

ï           Fees?

ï           What's included?

ï           References?

Red Flags:

ï           Too cheap (quality?)

ï           Promises too good to be true

ï           Poor communication

)רואה חשבון מוסמך( licensed Not   •

ï           Doesn't ask enough questions

Interview Multiple:

ï           Get quotes from 3-5

ï           Compare not just price but expertise

ï           Chemistry matters (long-term relationship)

Cost Expectations

Annual Tax Preparation:

ï           Simple employment: ₪1,500-3,000

ï           Self-employed: ₪3,000-8,000

ï           Complex (foreign income, US): ₪5,000-15,000

ï           Business: ₪10,000-50,000+

Consulting:

ï           Hourly: ₪400-800/hour

ï           Project-based: Varies

Worth It?

ï           Almost always yes

ï           Especially first few years

ï           Cost is tax-deductible!

Tax Authority (המיסים רשות)

Israel Tax Authority Basics

**Website: www.taxes.gov.il

ï           Hebrew primarily

ï           Some English sections

ï           Can file online

ï           View your account

Offices:

ï           All major cities

ï           By appointment (usually)

ï           Better to go through accountant

**Phone: **4954 or *4954

ï           Hebrew primarily

ï           Long waits common

Powers:

ï           Audit returns (7 years back)

ï           Assess additional tax

ï           Penalties for errors/late filing

ï           Interest on unpaid tax

ï           Lien on property if serious

Rights:

ï           Appeal assessments

ï           Request payment plans

ï           Representation by accountant

Tax Calendar for Olim

First Year Timeline

Upon Arrival:

ï           Get teudat zehut (ID)

ï           Open bank account

ï           Register with tax authority (file 1254 form for tax ID if self-employed)

Within 3 Months:

ï           Choose health fund

ï           Understand tax residency status

ï           Consult accountant about situation

Throughout Year:

ï           Keep all records

ï           Track income sources

ï           Save receipts for deductions

ï           Set aside money for taxes (if self-employed)

By December 31:

ï           Review year, estimate taxes

ï           Make charitable donations (if desired)

ï           Consider timing of income/expenses

By April 30 (Next Year):

ï           File annual return

ï           Or request extension if not ready

Ongoing Deadlines

Annual Return:

ï           April 30 - Employees (if filing)

ï           May 31 - Self-employed (usually extended)

ï           Extensions common (request before deadline)

Quarterly Estimates (Self-Employed):

ï           4 payments during year

ï           Based on prior year or estimates

Important Dates:

ï           January 31: Issue Form 106 to employees (employers)

ï           March 31: Various business reports

Long-Term Tax Planning

Years 1-3: Get Established

Focus:

ï           Understand Israeli system

ï           File correctly

ï           Build relationship with accountant

ï           Organize records system

ï           Take advantage of oleh benefits

Key Moves:

ï           Max out tax-advantaged savings (pension, study fund)

ï           Claim all credits

ï           Document everything

Years 4-7: Optimize

Focus:

ï           Maximize benefits

ï           Build wealth tax-efficiently

ï           Consider long-term structure

Strategies:

ï           Foreign investments (still exempt)

ï           Consider real estate timing

ï           Business structure optimization

ï           Maximize retirement contributions

Years 8-10: Prepare for Transition

Focus:

ï           Plan for end of benefits

ï           Strategic timing of transactions

ï           Restructuring if needed

Key Decisions:

ï           Sell foreign real estate before year 10?

ï           Realize capital gains while exempt?

ï           Restructure investments?

ï           Review pension structure?

**Critical: **Start planning in year 8, not year 10!

Year 11+: New Reality

Changes:

ï           Foreign passive income now taxable

ï           Capital gains on foreign assets taxable

ï           May need to report foreign assets

ï           Higher tax burden

Mitigation:

ï           Foreign tax credits

ï           Double tax treaties

ï           Proper planning done years 8-10

ï           Continued optimization

Resources & Tools

Official Resources

Israel Tax Authority:

ï           Website: www.taxes.gov.il

ï           Phone: *4954

ï           Forms and guidance (Hebrew primarily)

Ministry of Finance:

ï           www.mof.gov.il

ï           Tax policy information

ï           Treaty information

For Olim

Nefesh B'Nefesh:

ï           www.nbn.org.il

ï           Tax information for olim

ï           Accountant recommendations

ï           Webinars and guides

AACI:

ï           www.aaci.org.il

ï           Accountant directory

ï           Tax courses

ï           Community knowledge

Online Tools

Tax Calculator:

ï           Various websites offer calculators

ï           Estimate tax liability

ï           Plan withholding

Currency Converters:

ï           Important for foreign income reporting

ï           Use official Bank of Israel rates

Professional Associations

Institute of Certified Public Accountants in Israel:

ï           www.icpas.org.il

ï           Verify accountant credentials

ï           Find certified professionals

Frequently Asked Questions

Q: Do I need to file in my first partial year?

**A: **Yes, if you have Israeli income. Tax year = calendar year. Report from arrival date.

Q: Can I use a foreign accountant?

**A: **They can help with home country, but need Israeli accountant for Israeli return.

Q: What if I can't pay the tax I owe?

**A: **Payment plans available. Contact tax authority before deadline. Interest accrues but better than penalties.

Q: Are oleh benefits automatic?

**A: **Mostly yes, but you may need to file return claiming exemptions. Keep documentation.

Q: Do I pay tax on money I bring to Israel?

**A: **No! Bringing previously-earned/saved money is not taxable. Not income.

Q: What about gifts/inheritance from abroad?

**A: **Generally not taxable. Large amounts may need documentation. Inheritance tax abolished in Israel (2005).

Q: Can I deduct mortgage interest?

**A: **Only on rental property (in option 2). Not on primary residence.

Q: What if I'm audited?

**A: **Your accountant represents you. Provide documentation requested. Most audits routine.

Q: Do I pay Israeli tax on US Social Security?

**A: **Exempt if oleh (10 years), then treaty governs (usually US taxes).

Q: Should I form a company for my freelance work?

**A: **Depends on income level, liability concerns, tax planning. Consult accountant. Usually worthwhile over ~₪500K revenue.

Summary: Key Takeaways

The Good News

Israel is Very Tax-Friendly to Olim:

ï           10 years of benefits on foreign passive income

ï           No tax on foreign assets/investments (years 1-10)

ï           Tax credits for new immigrants

ï           Double tax treaties prevent double taxation

ï           Reasonable rates compared to many countries

The Requirements

You Must:

ï           Understand your tax residency status

ï           File returns when required

ï           Pay Israeli tax on Israeli-source income

ï           Keep detailed records (7 years)

ï           Get professional help if complex

ï           Stay compliant in home country too (if applicable)

The Smart Approach

Best Practices:

**1.        Hire a qualified accountant **- Worth every shekel

**2.        Organize from day one **- Digital folders for everything

**3.        Understand your benefits **- But also their limits

**4.        Plan ahead **- Especially for year 11 transition

**5.        Keep both systems compliant **- Israel AND home country

**6.        Ask questions **- To accountant, before decisions

**7.        Save records **- 7 years, everything

**8.        Time transactions strategically **- Major financial moves

**9.        Max out tax-advantaged accounts **- Pension, study fund

**10.     Review annually **- With accountant, adjust strategy

The Bottom Line

Israeli taxation for olim:

ï           **Generous benefits **for first 10 years

ï           **Reasonable system **overall

ï           **Complex enough **to need professional help

ï           **Manageable **with good guidance

ï           **Part of successful aliyah **financial planning

With proper planning and professional help, you can navigate Israeli taxation successfully and take full advantage of the generous oleh benefits!

Final Reminders

This guide is for general information only. Tax law is complex and changes frequently. Before making any major financial decisions:

ï           Consult a qualified Israeli tax accountant (חשבון רואה)

ï           Consider your specific situation

ï           Get professional advice tailored to you

ï           Stay informed about law changes

Key message: The 10-year oleh benefits are amazing - don't miss out by not understanding them! But also don't make mistakes by assuming you know everything. Get professional help, file correctly, keep records, and enjoy the benefits of Israel's welcoming tax system for new immigrants!

B'hatzlacha with your financial planning in Israel! 

Questions? Consult:

ï           Qualified Israeli tax accountant (מוסמך חשבון רואה)

ï           Nefesh B'Nefesh tax resources

ï           Israel Tax Authority: *4954 or www.taxes.gov.il

ï           Professional tax attorney for complex situations

Stay compliant, maximize benefits, and welcome home!

Updated on: 02/02/2026