New Tax Benefit for New Immigrants: Tax Exemption for Two Years

The 2026 tax benefit for new immigrants offers an unprecedented 0% tax exemption on income from Israel. Here’s everything you need to know about the new reform.

On November 6, 2025, Finance Minister Bezalel Smotrich and Minister of Aliyah and Integration Ofir Sofer presented a reform in the taxation of new immigrants. An official bill has not yet been published, but the reform is expected to be approved as part of the state budget for 2026. The purpose of this initiative is to encourage immigration to Israel through significant tax benefits for new immigrants and returning residents.

The reform is expected to grant full and partial tax exemptions in the first years of residence in Israel. The goal is to strengthen the economy, ease the integration of new immigrants, and attract high-quality human capital to Israel.

Background to the Initiative

The launch of the new program at this time is driven by several underlying factors. In the past two years, there has been a significant increase in antisemitic incidents worldwide, especially following the “Am-Kelavi” war. This has caused many Jews to consider making Aliyah to Israel.

Additionally, Western countries such as the UK have recently made changes to their tax policies, making Israel more attractive for Jews with capital.

Furthermore, there is a need to strengthen the Israeli economy and attract high quality human capital (professionals, entrepreneurs, high-tech workers, etc.) who will contribute to economic growth and development of the economy.

What is the New Benefit and Who is Eligible?

Under the new program, tax benefits are expected to be granted to new immigrants and returning residents who immigrate to Israel during 2026. They will enjoy an unprecedented tax benefit on employment income as employees or self-employed individuals, generated in Israel.

Tax Rates Under the New Benefit:

*Applies to income up to 1 million ₪ per year (as of 2025).

The Difference Between a New Immigrant and a Returning Resident

New immigrant – someone who immigrated to Israel for the first time under the Law of Return, 1950, and is a resident of Israel for the first time after immigration.” According to the definition, a new immigrant is someone who was not a resident of Israel before.

Returning resident – an individual who was a resident of Israel, ceased to be a resident of Israel, and returned to become a resident of Israel.” In other words, a returning resident is someone who was a resident of Israel in the past, left Israel for an extended period, and then decided to return.

There is a distinction between a regular returning resident and a veteran returning resident regarding existing tax benefits. A regular returning resident is someone who stayed outside Israel for 5 to 10 years. A veteran returning resident is someone who stayed outside Israel for more than 10 years. Tax benefits for a veteran returning resident are more significant than those for a regular returning resident and are similar to those of a new immigrant.

Income Ceiling

The benefit will apply to incomes of up to 1 million ₪ per year. Income above this threshold will be taxed according to the credit points for new immigrants and veteran returning residents.

For Example:

A new immigrant earns 400,000₪ per year as an employee in Israel. Under the new benefits, they will not pay any tax in the first two years (2026-2027). This represents savings of tens of thousands of shekels compared to the current situation.

Additional Benefits Beyond Tax Exemption on Israeli Income

It is important to emphasize that the new benefit is added to existing benefits that new immigrants and returning residents are currently entitled to and does not replace them.

Benefits That will Continue to Exist (as of 2025)

1. Tax exemption on income from outside Israel for 10 years from the date of becoming an Israeli resident (subject to the type of income and resident status).
2. Increased tax credit points for new immigrants.
3. Purchase tax exemption on a first apartment (subject to conditions).
4. Tax exemption on assets and property brought from outside Israel.

A new immigrant can enjoy both exemptions simultaneously. The firs, exemption on foreign income for 10 years. The second, gradual exemption on Israeli income, up to 5 years. This is a dual tax advantage that constitutes a very strong economic incentive.

For additional information on the full range of benefits available to new immigrants (as of 2023) click here.

Criticism of the Program – Important Points to Know

Some critics argue that the benefit primarily favors wealthy immigrants and those with high incomes, and less to other populations or veteran citizens. However, from a professional and legal perspective, the benefit represents a significant economic opportunity that should be properly examined and utilized subject to each potential immigrant’s personal situation.

Important Tax Aspects

New immigrants must accurately report assets, bank accounts, and investments abroad. Failure to report may lead to heavy penalties. Additionally, it is important to understand the tax implications of changing residency, both in Israel and in the country of origin. In some cases, double taxation or complex reporting obligations may occur. There is a possibility to combine the new benefit with additional benefits such as subsidized loans.

Preparing for Immigration: Practical Steps

1. Verify that you meet the definition of “New Immigrant” or “Returning Resident” according to the Law of Return and Income Tax Ordinance. It is recommended to consult a professional entity.
2. Consult an international taxation expert to understand the full implications and plan the transition optimally.
3. Ensure you properly close tax obligations in the country from which you are immigrating and understand the double taxation prevention agreements.
4. Open a file with the Ministry of Aliyah and Integration.
5. Plan ahead for issues such as opening a bank account in Israel, purchasing an apartment, transferring funds, establishing a business, etc.

The new tax reform for immigrants and returning residents represents a significant and unprecedented economic opportunity. Full tax exemption for two years, combined with existing benefits, creates a very strong economic incentive for those considering immigration to Israel.

Nimrod Yaron & Co. specializes in Israeli and international taxation. The firm accompanies new immigrants and returning residents at all stages of the process, from early tax planning, through arranging residency status, to ongoing support in taxation matters, property acquisition, and establishing businesses in Israel. To contact a representative from our firm, click here.

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