What Happened?
On April 7, 2024, the Knesset passed an amendment to the Income Tax Ordinance, repealing the exemption previously granted to new immigrants and veteran returning residents from filing reports on income and assets outside Israel for a period of ten years.
The repeal applies to individuals who become Israeli residents on or after January 1, 2026.
Who Is Affected?
This amendment is relevant to:
- New immigrants – individuals who qualify as “Israeli residents for the first time” under the Income Tax Ordinance.
- Veteran returning residents – individuals who were not Israeli residents for ten consecutive years prior to their return to Israel.
- Professional representatives advising such individuals.
What Will Change?
Prior to the amendment, new immigrants and veteran returning residents were entitled to a 10-year exemption from reporting income and assets outside Israel, starting from the date of immigration or return.
The amendment abolishes this exemption. Starting January 1, 2026, anyone becoming an Israeli resident for the first time or a veteran returning resident will be required to file reports on foreign income and assets
Legislative Background
This amendment results from an international demand by the OECD to enhance transparency and promote the exchange of information regarding the income and assets of individuals, including those in Israel.
The Adjustment Year – Does It Postpone the Application of the Amendment?
A new immigrant may elect to have the first year after immigration considered an “Acclimation Year“.” During this year, the individual may reconsider the decision to immigrate; although their center of life is in Israel, they will not be considered an Israeli resident for tax purposes during that year.
Does this mean the Acclimation Year postpones the date on which the individual becomes an Israeli resident? In our view – no.
The definition of “Israeli resident” is determined according to the center of life tests (which include factors such as the individual’s permanent home, residence of family members, place of work or business, economic interests, and social affiliations).
Importantly, the Acclimation Year is counted within the 10-year benefit period, meaning that for tax purposes the individual is already regarded as an Israeli resident during that year.
Therefore, in our opinion, the date on which an individual becomes an Israeli resident for the first time (or a veteran returning resident) is the actual date of immigration or return, even if an Acclimation Year is chosen.
What Should You Do Now?
Individuals considering immigration to, or returning to, Israel are advised to establish strong ties to Israel before the end of the current calendar year in order to secure eligibility for the 10-year reporting exemption (which remains available only until December 31, 2025).
How Can We Assist?
We would be pleased to provide tailored legal advice to individuals planning to immigrate to Israel or return as veteran residents, as well as to those who have elected an Acclimation Year after January 1, 2025.
The above content is a summary provided for informational purposes only and does not constitute legal advice. It should not be relied upon without obtaining further professional legal counsel.
