Tax & Finance

Do new immigrants have to report their foreign income and assets to the Israeli tax authority?

Q: Do new immigrants have to report their foreign income and assets to the Israeli tax authority?

For ten years, generally no. Under Amendment 168 to the Income Tax Ordinance, which took effect in 2008, new immigrants (olim) and senior returning residents receive a 10-year exemption from Israeli tax on foreign-source income, and during the same period they are also exempt from reporting that foreign income and those foreign assets to the Israel Tax Authority. The exemption clock starts on the date a person becomes an Israeli resident for tax purposes. Israeli-source income remains fully taxable and reportable, and citizens of countries such as the United States must still report to their home tax authority.

      For ten years, generally no. Under Amendment 168 to the Income Tax Ordinance, which took effect in 2008, new immigrants (olim) and senior returning residents receive a 10-year exemption from Israeli tax on foreign-source income, and during the same period they are also exempt from reporting that foreign income and those foreign assets to the Israel Tax Authority. The exemption clock starts on the date a person becomes an Israeli resident for tax purposes. Israeli-source income remains fully taxable and reportable, and citizens of countries such as the United States must still report to their home tax authority.
    

The reform introduced by Amendment 168 was designed to encourage Aliyah and the return of Israelis who had lived abroad for many years. It applies to two groups: new immigrants, and senior returning residents who were non-residents for at least ten consecutive years before coming back. For both, foreign-source income such as overseas salary, dividends, interest, rent, pensions, and capital gains is exempt from Israeli tax for ten years. The unusual part is the parallel reporting exemption, which means the holder is not required to disclose the existence, value, or income of foreign assets in their Israeli tax filings during the benefit period. This is one of the most generous regimes of its kind among developed economies and is a central reason high-net-worth families consider relocating to Israel.

The exemption has firm limits that catch people who plan carelessly. It covers foreign-source income only, so salary for work physically performed in Israel, or income from Israeli assets, is taxed and reported from day one. The relief ends after ten years, after which worldwide income and full reporting apply, so a long-term plan should anticipate that cliff rather than be surprised by it. The Israeli exemption also does nothing to relieve obligations abroad. United States citizens, in particular, remain subject to IRS filing and to FBAR and FATCA reporting on foreign accounts regardless of their Israeli status. Anyone relying on the regime should fix their residency start date carefully and consider the optional one-year adjustment period. Our guide to Oleh benefits and tax breaks for new immigrants sets out the full package.

⚖ In Practice

Governing law: Amendment 168 (2008) to the Income Tax Ordinance [New Version] 5721-1961
Competent authority: Israel Tax Authority (Rashut HaMisim)
Exemption period: 10 years from the date of becoming an Israeli tax resident
Scope: exemption from both tax and reporting on foreign-source income and foreign assets
Not covered: Israeli-source income, which is taxable and reportable from day one
Caution for US citizens: IRS filing plus FBAR and FATCA reporting continue regardless of the Israeli exemption

From the full guide: Oleh Benefits & Tax Breaks for New Immigrants to Israel

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Do new immigrants have to report their foreign income and assets to the Israeli tax authority?

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