Filing Taxes as a New Resident of Israel -

Detailed Guide

Determining Tax Residency Status

Israel uses two main tests to determine tax residency:

**1.  Center of Life Test **- You're a tax resident if your center of life is in Israel, considering:

ï           Where your family lives

ï           Where your economic interests are centered

ï           Your permanent home location

ï           Social and community ties

**2.  183-Day Rule **- You're automatically a tax resident if you're physically in Israel for 183 days or more during a tax year (or 30+ days in current year AND 425+ days over current + prior 2 years)

New Immigrant (Oleh Chadash) Benefits

If you made Aliyah, you may qualify for **10-year tax benefits **under the "New Immigrant and Returning Resident" provisions:

First 10 years after Aliyah:

ï           Foreign-sourced passive income **(interest, dividends, capital gains, rental income) is **tax-exempt

ï           **Foreign pension income **is tax-exempt

ï           **Foreign employment income **earned while working abroad may be exempt (conditions apply)

ï           No requirement to report foreign assets or income during this period

Important notes:

ï           Benefits start from the tax year you receive immigrant status

ï           "Returning resident" (returning after 10+ years abroad) gets similar but more limited benefits

ï           You must be registered as an Oleh with the Interior Ministry

Tax Year and Filing Deadlines

**Tax year: **January 1 - December 31

Filing deadlines:

ï           **Individual return: **April 30 (for previous tax year)

ï           **With extension: **Can extend to November 30 if filed through an accountant

ï           **First-time filers: **May receive automatic extensions

What You Need to Report (Non-Oleh or After Benefits Expire)

Once you're a full Israeli tax resident:

Worldwide income including:

ï           Employment income (salary, bonuses, benefits)

ï           Self-employment/business income

ï           Rental income (Israeli and foreign)

ï           Investment income (dividends, interest, capital gains)

ï           Pension distributions

ï           Any other income sources

Asset reporting:

ï           Foreign bank accounts over certain thresholds

ï           Foreign financial assets

ï           Controlled foreign corporations

Israeli Tax Rates (Based on 2024 brackets)

Individual income tax (progressive rates):

ï           Up to ₪84,120: 10%

ï           ₪84,121 - ₪120,720: 14%

ï           ₪120,721 - ₪193,800: 20%

ï           ₪193,801 - ₪269,280: 31%

ï           ₪269,281 - ₪560,280: 35%

ï           ₪560,281 - ₪721,560: 47%

ï           Above ₪721,560: 50%

Tax credits:

ï           Standard personal credit point: ₪2,832 annually (reduces tax)

ï           Additional credits for children, single parents, new immigrants, etc.

Capital gains tax:

ï           Real estate: 25% (with exemptions for primary residence)

ï           Securities: 25% (or 30% for controlling shareholders)

National Insurance (Bituach Leumi) and Health Tax:

ï           Approximately 12-17% on employment income (varies by income level)

ï           Self-employed pay different rates

First-Year Filing Considerations

Part-year resident:

ï           If you became a resident mid-year, you typically report only Israeli-sourced income for the pre-residency period

ï           Worldwide income after becoming a resident

Foreign tax credits:

ï           Israel has tax treaties with many countries to prevent double taxation

ï           You can claim credit for foreign taxes paid on the same income

Timing of residency determination:

ï           When you become a resident affects your obligations

ï           Document your arrival date and establishment of residency

Required Forms and Documents

Main forms:

ï           **Form 1301 **- Annual income tax return for individuals

ï           **Form 1322 **- Report of foreign assets and income

ï           **Form 1324 **- Report of controlled foreign corporations

Documents to gather:

ï           Israeli ID (Teudat Zehut) or passport

ï           Employment income statements (Form 106 from employers)

ï           Foreign income documentation

ï           Bank statements

ï           Investment statements

ï           Rental agreements and income records

ï           Receipts for deductible expenses

Payment and Refunds

Payment methods:

ï           Monthly withholding from salary (Mas Hachnasa)

ï           Advance payments for self-employed

ï           Final payment when filing return

Refunds:

ï           Processed by Israel Tax Authority (Mas Hachnasa)

ï           Can take several months

ï           Deposited directly to your Israeli bank account

Special Situations for New Residents

1.  Foreign pension transfers:

ï           May qualify for tax benefits if transferred during first year

ï           Requires specific planning

2.  Foreign employment while resident:

ï           Complex rules about what constitutes "foreign-sourced"

ï           Need to determine if work is truly performed abroad

3.  Crypto and digital assets:

ï           Israel taxes cryptocurrency gains

ï           Report on tax return

4.  Stock options and equity compensation:

ï           Complex taxation, especially if granted before residency

ï           May qualify for Section 102 benefits if from Israeli employer

Getting Help

Options:

ï           **Israeli Tax Authority (Mas Hachnasa): **Government offices throughout Israel

ï           **Roe Ha'Cheshbon (CPA): **Accountants specializing in tax

ï           **Yoetz Mas: **Tax advisors

ï           Many offer services in English for new immigrants Strongly recommended to hire professional help if:

ï           You have complex foreign income

ï           You own foreign businesses

ï           You have significant investments

ï           You're self-employed

ï           You want to optimize Oleh benefits

Important Tips for New Residents

**1.        Register with Tax Authority **as soon as possible after arrival

**2.        Keep detailed records **of all income and expenses from day one

**3.        Understand your Oleh status **- benefits are significant but time-limited

**4.        Don't ignore foreign accounts **- reporting requirements exist even if income is exempt

**5.        File on time **- late filing penalties are substantial

**6.        Consider tax planning **before making major financial decisions

**7.        Get professional advice **in your first year to set up properly

Common Mistakes to Avoid

ï           Assuming Oleh benefits apply automatically (must claim them)

ï           Not reporting foreign income that should be reported

ï           Missing deadlines and incurring penalties

ï           Not claiming all eligible tax credits

ï           Failing to file if you assume you have no tax liability

Contact Information

Israel Tax Authority:

ï           Website: www.gov.il/taxes (available in English)

ï           Phone: *4954 (from Israel)

ï           Service centers throughout major cities

Updated on: 02/02/2026