Quick Answer: When you cease to be an Israeli tax resident, Section 100A of the Income Tax Ordinance 5721-1961 treats all your financial assets as if they were sold the day before you left. Capital gains tax at 25% (or 30% for controlling shareholders holding 10%+ of a company) applies to the portion of any gain that accrued during your Israeli residency period. You can pay immediately on a deemed sale or elect to defer payment until you actually sell each asset — but the deferral must be elected before or at departure and notified to the Israel Tax Authority (Rashut HaMisim). New immigrants within their 10-year foreign-income exemption window are largely protected on foreign assets, though Israeli-source gains remain fully taxable.

An Israeli tax resident with a portfolio of US tech shares, a Swiss fund investment, and equity in a private Israeli startup boards a flight to relocate abroad. Under Israeli law, the Tax Authority's clock stopped the day before departure: every one of those financial assets is treated as having been sold at fair market value on that date, and capital gains tax falls due on the gain that built up during the Israeli residency period. The gain is notional — no money was received, no actual sale occurred — but the tax is real, and the Israel Tax Authority expects it to be reported and paid.

This guide explains how Section 100A operates: what triggers it, which assets it reaches, how the proportional gain is calculated, the mechanics of electing deferral, and why new immigrants need to think carefully about their 10-year exemption before relocating abroad. The core legislation is the Income Tax Ordinance 5721-1961 (Pekudat Mas Hachnasa), primarily Section 100A (individuals) and Section 100B (companies).

1. What Is Israel's Exit Tax?

The Israeli exit tax is the tax consequence of ceasing to be a tax resident of Israel. It was introduced as part of Amendment 132 to the Income Tax Ordinance in 2002 and operates through Section 100A. The underlying principle is that Israel taxes its residents on their worldwide capital gains. If a resident builds up gains on assets while enjoying Israeli residency, and then leaves before realising those gains, Israel would permanently lose its taxing right on income that accrued under its jurisdiction. Section 100A prevents that outcome.

The mechanism is a deemed disposal. On the day before a person ceases to be an Israeli tax resident, all of their financial assets are treated as having been sold at fair market value. Any gain above the tax-adjusted acquisition cost is crystallised on paper, and capital gains tax applies to the portion of that gain attributable to the Israeli residency period. No sale proceeds are received — but the tax liability is real and must be reported to the ITA.

The same basic logic applies to companies. Section 100B of the Income Tax Ordinance creates an equivalent deemed-disposal for companies that cease to be Israeli residents, with corporate tax rates applying to the proportional gain.

In Practice — The Trigger Date: Section 100A is triggered when a person ceases to be an Israeli tax resident under the merkaz chayim (centre of life) test in Section 1 of the Income Tax Ordinance. That test looks at where your family, home, economic interests, and social connections are concentrated. A person who relocates permanently abroad, closes their Israeli bank accounts, moves their family, and takes up work abroad will typically cease to be an Israeli resident as of the date those connections genuinely shift — not the date of their last flight out of Israel. The ITA can and does investigate the precise cessation date, because it determines which gains fall within the exit tax calculation. Keep contemporaneous records: the date of foreign lease or purchase agreements, when children enrolled in foreign schools, and when foreign employment started. These documents become critical if the ITA disputes when residency ended.

2. Who Is Subject to the Exit Tax?

The exit tax applies to any individual who was an Israeli tax resident and ceases to be one, wherever they relocate. Citizenship is irrelevant: a German national who spent five years in Israel as a tax resident and then returned to Germany is fully subject to Section 100A. The practical groups most commonly affected are:

  • Expats finishing an assignment: Foreign executives, tech workers, and professionals who came to Israel on work visas or through Aliyah and are now returning home or moving to a third country.
  • Olim who changed their minds: Jewish immigrants who made Aliyah, accumulated assets during their Israeli residency, and later decided to return to their country of origin or move elsewhere.
  • Returning residents (Toshav Hozer): People who held Toshav Hozer status and later leave again after re-establishing Israeli residency.
  • Foreign entrepreneurs and investors: Anyone who moved to Israel to run a startup or business, acquired company equity or options, and then left while still holding those assets.

The exit tax does not apply to people who were never Israeli tax residents — a non-resident foreign investor holding Israeli shares and selling them from abroad is subject to a different capital gains tax provision, not Section 100A.

In Practice — Controlling Shareholders and the 30% Rate: Under Section 88 of the Income Tax Ordinance, a person who holds, directly or indirectly, 10% or more of any class of shares in a company is classified as a "controlling shareholder" (baal shlitta). The capital gains tax rate for controlling shareholders is 30% rather than 25%, and that higher rate applies to the exit tax calculation as well. Founders and senior employees of Israeli startups — who routinely hold significant equity stakes — frequently fall into this category. The classification is assessed at the deemed-disposal date: the day before departure from Israel.
In Practice: Section 100A of the Income Tax Ordinance is triggered the day before a person ceases to be an Israeli tax resident under the merkaz chayim (centre of life) test — not on the day of departure. The Israel Tax Authority's district office in Tel Aviv (Pekid Hashuma LeGaviya Yehudit) typically expects written pre-departure notification at least 60 days before the planned cessation date for portfolios with estimated exit tax above NIS 300,000. For Olim leaving within the 10-year foreign-income exemption window under Section 14(a), the notification must separately identify which assets are claimed as exempt under Section 14 and which Israeli-source assets are subject to Section 100A — the ITA does not apply exemptions automatically. Failure to file a final return covering both the exemption analysis and the exit tax calculation results in automatic penalties of 15% of the tax owed under Section 191B of the Income Tax Ordinance.

3. Which Assets Are Included in the Deemed Sale?

Section 100A reaches all "assets" as defined in Section 88 of the Income Tax Ordinance. In practice, this covers:

  • Shares and equity interests: publicly traded shares, private company shares, startup equity, vested and exercised options, warrants
  • Bonds and debt instruments with a capital gains component
  • Units in mutual funds, ETFs, and provident funds with embedded capital appreciation
  • Rights and entitlements in companies: profit-sharing rights, phantom equity, economic rights separate from shares
  • Loans with an equity upside: convertible notes and SAFEs that have not yet converted but carry embedded value
  • Foreign financial assets: a US brokerage account, European investment portfolio, or shares in a family holding company abroad held during Israeli residency

Israeli real estate is excluded from Section 100A. Property gains are taxed separately under the Real Property Taxation Law 5723-1963 when the property is actually sold. Foreign real estate occupies a more complex position and should be confirmed with a specialist advisor based on specific facts.

Assets acquired after you ceased to be an Israeli resident carry no Israeli exit tax exposure — no Israeli taxing right ever attached to them.

4. How the Exit Tax Is Calculated

The exit tax is not levied on the entire gain from acquisition to sale. It applies only to the proportional gain attributable to the Israeli residency period. This proportionality mechanic is central to Section 100A and substantially reduces the tax for assets held before a person became an Israeli resident.

Step 1: Calculate the total deemed gain

Total deemed gain = Fair market value of the asset on the deemed-disposal date (day before departure) minus the tax-adjusted acquisition cost (original cost, indexed for Israeli CPI linkage where applicable under Section 88).

Step 2: Apply the residency proportion

Israeli taxable gain = Total deemed gain × (Number of days as Israeli tax resident during holding period ÷ Total number of days of asset ownership from acquisition to deemed disposal)

Step 3: Apply the applicable rate

  • 25% for individual taxpayers on most financial assets
  • 30% for controlling shareholders (10%+ holders) under Section 88
  • Applicable corporate rate for companies under Section 100B
In Practice — Worked Example: A US tech executive becomes an Israeli tax resident on 1 January 2020. He holds 50,000 shares in a NASDAQ-listed company, acquired on 1 January 2016 at a total cost of USD 200,000. On 31 December 2025 (the day before he ceases to be an Israeli resident), those shares trade at USD 600,000. Total deemed gain: USD 400,000. Israeli residency period during ownership: 6 years (2,192 days). Total ownership period: 10 years (3,652 days). Israeli proportion: 2,192 ÷ 3,652 = 60%. Israeli taxable gain: USD 400,000 × 60% = USD 240,000. Exit tax at 25%: approximately USD 60,000. The remaining 40% of the gain — attributable to the pre-Israel period — is not taxed by Israel at all. The ITA calculates in NIS, so USD amounts are converted at the Bank of Israel representative exchange rate (shaar yaztug) published on the deemed-disposal date.

Assets acquired entirely during Israeli residency

Where you acquired an asset after becoming an Israeli tax resident and still hold it at departure, the entire gain is Israeli — the proportion is 100%. This is typical for startup shares granted under an Israeli Section 102 option plan, deposits in Israeli bank accounts accruing interest, or shares in Israeli companies purchased during your residency.

5. The Deferral Option: Pay Later, When You Actually Sell

Paying capital gains tax on gains that are only notional — existing on paper but not converted into cash — creates a genuine cash flow problem. A person leaving Israel with a portfolio of illiquid startup shares cannot easily write a cheque to the ITA for deemed gains they cannot access. Section 100A(b) provides relief through a deferral election.

Under deferral, you do not pay exit tax at departure. When each asset is eventually sold in the real world, you calculate the Israeli portion of the actual sale gain and pay Israeli capital gains tax on that amount at that time. The proportionality formula remains unchanged — Israeli residency days divided by total holding period days — but the taxable gain is based on the actual sale price, not the FMV at departure.

How to make the deferral election

Notify the ITA of your intention to defer, through your final annual income tax return for the year of departure or a written submission to the ITA district office handling your file before departure. In practice, most advisors recommend giving the ITA written notice of the election and the relevant asset list at least two to three months before the planned departure date. Late notifications — after the deemed-disposal date has passed — are rarely accepted.

When deferral makes sense

  • You hold illiquid assets — private company shares, startup equity — that you cannot sell at departure
  • You expect the asset value to fall before eventual sale, reducing the taxable gain
  • You need the proceeds from the eventual sale to fund the tax payment

When paying immediately may be better

  • You plan to sell the assets shortly after leaving anyway
  • The asset is likely to appreciate significantly, meaning the deferred Israeli gain will be larger than the current deemed gain
  • Your new country of residence taxes capital gains in a way that creates double-taxation risk on the deferred Israeli portion

A South African entrepreneur relocated to Israel in 2016 under the Law of Return, building Israeli residency while retaining a 23% shareholding in a Johannesburg-based private company acquired in 2010 for ZAR 2 million, worth approximately ZAR 18 million (NIS 3.8 million) at the time he ceased Israeli residency in 2024. His Israeli residency period covered 8 of the 14 years of ownership (57%). The ITA assessed Israeli taxable gain at NIS 3.4 million × 57% = NIS 1.94 million, with exit tax at 30% (controlling shareholder rate) = approximately NIS 582,000. Because the South African shares were illiquid, the taxpayer elected deferral under Section 100A(b) and provided a bank guarantee of NIS 582,000. When the company was sold in 2025 for ZAR 22 million, the actual gain was larger than the deemed gain — meaning the deferred election locked in a lower Israeli taxable base than had the shares appreciated further. The lesson: deferral is not always more expensive — for illiquid assets in volatile currencies, it can be the right choice if the asset later sells for less than its value at departure date.

In Practice — ITA Guarantees for Deferred Exit Tax: For taxpayers with significant portfolios, the Israel Tax Authority has authority under Section 100A(c) to require a bank guarantee or other security in respect of the deferred tax liability before permitting deferral. In practice, the ITA invokes this requirement when the estimated deferred exit tax liability exceeds approximately NIS 1,000,000. The guarantee amount corresponds to the estimated tax on the deemed gain at departure. Once each asset is actually sold and the proportional Israeli tax is paid, the portion of the guarantee covering that asset is released. Foreign nationals planning to leave with significant Israeli startup equity or large investment portfolios should factor in 2 to 4 months for ITA engagement and guarantee negotiation.

6. Real Estate and the Exit Tax

Israeli real estate sits entirely outside Section 100A. Gains on the sale of Israeli property — apartments, commercial premises, land — are taxed under the Real Property Taxation Law 5723-1963 as betterment tax (mas shevach), and that tax applies when the property is actually sold, not when the owner leaves Israel.

This creates a practical advantage for departing residents who hold Israeli apartments: no exit tax is owed on an unsold property. The gain is preserved and will be taxed when you eventually sell, at the then-applicable rates, subject to any available exemptions at that time.

Key points for departing residents with Israeli property:

  • The single-apartment exemption (ptur hadira hayechida) under Section 49B of the Land Taxation Law is available primarily to Israeli residents at the time of sale. Non-residents selling an Israeli apartment after leaving may lose eligibility, paying capital gains tax at 25% rather than enjoying the exemption. In 2026, the exempt ceiling under Section 49B covers gains up to approximately NIS 5,008,000. Selling before departure — while still a resident — can preserve the exemption for eligible sellers.
  • Non-resident withholding on property sales: When a non-resident sells Israeli real estate, the Israeli buyer must withhold 7.5% of the sale price at source under the Real Property Taxation Law, unless the non-resident first obtains a reduced-withholding certificate from the ITA (ishur nisui me'atav).
In Practice — Timing the Apartment Sale: A departing Israeli resident who owns a qualifying apartment should run the numbers before booking the moving truck. Consider this scenario: an apartment purchased for NIS 1,500,000 that is now worth NIS 4,000,000 — a gain of NIS 2,500,000. Sold as a resident under the single-apartment exemption: Israeli tax = NIS 0 (gain below the NIS 5,008,000 ceiling). Sold after departure as a non-resident: Israeli betterment tax at 25% = NIS 625,000. The exemption is worth the equivalent of a full year's gross salary for many buyers. If eligibility conditions are met and the timeline allows, selling the apartment before formally ceasing Israeli residency is one of the most material tax-planning decisions available to a departing resident.

7. New Immigrants (Olim) and the Exit Tax

Olim Chadashim who immigrate under the Law of Return receive a 10-year exemption from Israeli tax on foreign-source income and capital gains under Section 14(a) of the Income Tax Ordinance. The exemption covers passive income and capital gains from assets and sources outside Israel during the first decade of Israeli residency.

This exemption interacts directly with the exit tax. If an Oleh leaves Israel while still within the 10-year window, the foreign assets that were entirely exempt throughout the residency period are generally not subject to exit tax on the gain that accrued during the exempt period. The underlying logic: Israel never had a taxing right on those gains in the first place, so there is no Israeli taxing right to protect through Section 100A.

Several important carve-outs apply:

  • Israeli-source assets are never exempt, regardless of Oleh status. Startup shares in an Israeli company, options under an Israeli employer's Section 102 plan, and shares in Israeli publicly listed companies are always subject to Israeli capital gains tax — and therefore to exit tax on departure, regardless of the 10-year exemption.
  • After the 10-year exemption expires, appreciation on foreign assets becomes subject to Israeli tax. An Oleh who stays for 12 years and then leaves would owe exit tax on the proportional gain on foreign assets that accrued during the 2 post-exemption years, calculated using the standard Section 100A formula.
  • ITA scrutiny of short-residency Olim: The ITA has increased scrutiny of cases where immigrants appear to arrive in Israel primarily to accumulate gains under the 10-year exemption and then depart. Where this pattern exists, the ITA may challenge whether genuine Israeli residency was established or maintained, which could eliminate both the exemption and the exit tax protection simultaneously.
In Practice — The 2026 Reporting Change and Exit Tax: From 1 January 2026, under Amendment 268 to the Income Tax Ordinance, new immigrants and returning residents must report their worldwide assets and income annually to the Israel Tax Authority — even when no Israeli tax is owed on exempt foreign income. For Olim planning to leave Israel, this annual reporting means the ITA already holds a documented picture of their foreign asset portfolio. An Oleh who leaves without filing a departure notification and a proper exit tax analysis — on the informal assumption that "everything was exempt" — risks an ITA departure assessment based on those reported asset values, particularly if the ITA argues the exemption period had expired or that some assets were Israeli-source. The correct approach before departure is to file a final return, apply the exemption analysis asset by asset in writing, and document the legal position taken for each holding.

8. Practical Steps Before You Leave Israel

The exit tax analysis must happen before departure. By the time you land in your new country, the deemed-disposal date has already passed, the fair market value window has closed, and deferral elections may be unavailable. Here is the timeline that works in practice:

Six months before departure

  • Compile a full asset inventory. List every financial asset you hold: brokerage accounts in every country, private company shares, options (vested and unvested), fund units, convertible notes, and any loans with embedded value. Include acquisition dates and tax-adjusted acquisition costs for each asset.
  • Obtain preliminary valuations. For private company shares and startup equity, you will need a formal shuma (valuation report) from a licensed Israeli appraiser. Valuations of unlisted companies can take 4 to 8 weeks. For publicly traded assets, the Bank of Israel exchange rate on the departure date will be used for currency conversion.
  • Model deferral vs immediate payment. Run both scenarios with a licensed Israeli tax advisor and international tax advisor from your new country. Assess whether deferral creates double-taxation exposure in the new jurisdiction.

Two to four months before departure

  • Engage the ITA district office handling your tax file. Notify them in writing of your planned departure date and your intention to elect deferral, if applicable. For portfolios generating an estimated deferred tax liability above NIS 1,000,000, begin the bank guarantee negotiation at this stage.
  • Review Israeli property timing. If you hold Israeli real estate and plan to sell, model the single-apartment exemption. A sale completed before cessation of residency can avoid non-resident treatment and preserve the exemption.
  • Confirm your double-tax treaty position. Israel has treaties with approximately 60 countries, including the US, UK, Germany, and France. Some treaty provisions allow credit in the new country for deferred Israeli exit tax; others do not. This matters significantly for the overall economics of deferral.

At and after departure

  • File a partial-year annual tax return for the year of departure, covering the Israeli residency period up to cessation. This return must include the exit tax calculation or the formal deferral election, supported by asset valuations.
  • Keep records of the departure date and all steps taken to establish new residency abroad. These records protect you if the ITA disputes the precise date of cessation.
  • For each deferred asset, when you eventually sell it abroad, report the proportional Israeli gain to the ITA and pay the applicable tax. Failure to do so after electing deferral is treated as wilful evasion under Section 216 of the Income Tax Ordinance.
Penalties for Non-Compliance: Leaving Israel without addressing exit tax obligations — by paying, by formally electing deferral, or by documenting an exemption position — is treated by the ITA as unreported income under Section 216 of the Income Tax Ordinance. Civil penalties start at 15% of the tax owed, with interest and CPI linkage accruing from the date the tax first fell due. Where the ITA concludes that omission was deliberate, criminal prosecution under Section 220 carries sentences of up to 7 years' imprisonment and unlimited fines. The ITA receives cross-border financial data through CRS and FATCA reporting from banks in over 100 countries. A departing resident who sells assets abroad and deposits proceeds into a foreign bank account is highly likely to come to the ITA's attention.

Frequently Asked Questions

No. Real estate — including Israeli apartments and commercial property — is excluded from Section 100A of the Income Tax Ordinance. Gains on Israeli real estate are taxed separately under the Real Property Taxation Law 5723-1963 as betterment tax (mas shevach), and that tax applies when the property is actually sold, not when the owner leaves Israel. Foreign real estate held during Israeli residency occupies a more complex position and should be reviewed with a specialist advisor on a case-by-case basis.

Yes. Section 100A(b) of the Income Tax Ordinance allows a deferral election. Instead of paying on a deemed sale at departure, you pay when each asset is actually sold — but only on the proportional gain attributable to your Israeli residency period. The election must be communicated to the Israel Tax Authority before or at departure, typically through your final annual tax return. For large asset portfolios, the ITA may require a bank guarantee or other security under Section 100A(c). Deferral postpones payment; it does not eliminate the liability.

It depends on timing. If you leave while still within your 10-year foreign-income exemption under Section 14(a) of the Income Tax Ordinance, foreign assets that were entirely exempt from Israeli tax throughout the residency period are generally not subject to exit tax on the exempt gain. However, Israeli-source assets are never exempt from exit tax, regardless of Oleh status. If you leave after the 10-year exemption has expired, exit tax applies to the proportional gain on all assets built up during the post-exemption period. The interaction between the exemption and exit tax is technically complex and should be reviewed with a specialist tax advisor well before any planned departure.

The exit tax rate matches the standard Israeli capital gains tax rate applicable to the asset. For individuals on financial assets — shares, bonds, and securities — the rate is 25% on the proportional taxable gain. For controlling shareholders holding 10% or more of a company, the rate rises to 30% under Section 88 of the Income Tax Ordinance. Israeli real estate gains are taxed separately under the Real Property Taxation Law. Companies that cease to be Israeli residents are subject to Section 100B, with corporate tax rates applying to the proportional gain.

There is no fixed statutory pre-departure notification deadline in Section 100A itself, but the ITA expects exit tax to be addressed through your final annual tax return for the year of departure. For significant portfolios — particularly where deferral is elected — the ITA district office handling your file should be engaged 2 to 4 months before departure. Leaving without any notification and failing to report the deemed gain is treated as unreported income under Section 216 of the Income Tax Ordinance. Civil penalties start at 15% of the tax owed, and deliberate omission carries criminal exposure under Section 220.

Related Guides

Tax Residency in Israel: How It Is Determined Capital Gains Tax in Israel for Non-Residents: Rates, Exemptions and Treaty Relief Betterment Tax (Mas Shevach) on Israeli Real Estate: Complete Guide Toshav Hozer: Returning Resident Status in Israel Double Taxation Treaties with Israel: Country-by-Country Guide
Adv. Eli Shimony

Adv. Eli Shimony

Licensed Israeli Attorney

Adv. Eli Shimony advises foreign nationals, new immigrants, and international executives on Israeli income tax, exit tax planning, and cross-border asset structuring. He regularly assists clients in managing their exit tax position ahead of relocation, including deferral elections, ITA negotiations, and double-taxation treaty analysis.

Request Consultation Firm Website

Leaving Israel? Get Your Exit Tax Analysis Done First.

Section 100A creates real tax obligations that cannot be undone after departure. Adv. Eli Shimony helps clients plan their exit, elect deferral correctly, and engage with the ITA — before the deemed-disposal date passes.

Get Free Consultation →