IsraelLawHow is a US Roth IRA taxed in Israel after making Aliyah?
Israeli tax law looks at what an account actually is, not at the label it carries in the country where it was opened. A new immigrant and a veteran returning resident both receive a ten-year exemption on income and capital gains sourced outside Israel, and that exemption covers dividends, interest, and appreciation inside a foreign retirement account without any need to distinguish a Roth from a traditional plan. Once the exemption expires, the Israel Tax Authority has to place the distribution somewhere. Where the account is structured as a genuine pension arising from employment abroad, Section 9A(b) limits the Israeli charge to the tax the source country would have imposed, which for a qualified Roth distribution is nothing. Where the Authority treats the account as an ordinary investment portfolio, the earnings are taxed as investment income instead.
That characterization risk is the whole planning question, and it is worth settling before the tenth anniversary rather than after it. Americans should also remember that the United States taxes its citizens wherever they live, so the US treatment of the Roth is unaffected by the move, and the US-Israel tax treaty contains no provision that automatically preserves Roth status on the Israeli side. Practical steps are unglamorous but effective: keep documentation separating contributions from earnings, keep the account in your own name, and consider an advance ruling from the Israel Tax Authority. Immigrants arriving from 1 January 2026 also have to report foreign income and assets during the exemption period, so the account appears on the Israeli file long before it is taxable. Read the rules on foreign pensions alongside this.
- Governing law: Sections 14 and 97, Income Tax Ordinance [New Version] 5721-1961 (ten-year exemption for new residents); Section 9A(b) (source-country ceiling on a foreign pension)
- Competent authority: Israel Tax Authority (Rashut HaMisim), Department of International Taxation
- Exemption window: ten years from the date Israeli residency begins, with an optional adjustment year (shnat histaglut) that can be elected first
- Rates once the window closes: up to 47% at marginal rates plus the high-income surtax on annual income above approximately NIS 721,000 (2026), or 25% where the amount is treated as investment income
- Reporting: immigrants who arrived from 1 January 2026 must report foreign income and assets annually even while the exemption still applies
- Practical step: request an advance tax ruling (hachlatat misui) before relying on the Section 9A(b) ceiling for a Roth account
From the full guide: Foreign Pension Tax in Israel: What New Immigrants and Olim Need to Know
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