Dan Toledano

What happened? The Ministry of Finance circulated a draft bill implementing the Government’s decision regarding the economic program, aimed at encouraging immigration to Israel and return to Israel through tax incentives. The purpose of the bill is to encourage new immigrants and veteran returning residents to immigrate to, or return to Israel from January 2026 onwards. It is important to emphasize that this is a draft bill only, which has not yet been enacted into law, and therefore it may not be adopted, or may be adopted with changes from those reflected in the draft. Who is it relevant to? Individuals planning to immigrate to Israel in 2026, and their advisors. Legislative background According to the explanatory notes accompanying the draft, the proposed legislation is based on the growing manifestations of antisemitism worldwide, particularly following the outbreak of the "Swords of Iron" war, which may lead Jews to emigrate from their countries of residence. The purpose of the bill is to encourage potential immigrants and returning residents, particularly those belonging to higher socio-economic groups, to choose Israel as their destination. Current legal framework Under the current law, individuals who become Israeli residents for the first time, or veteran returning residents (individuals who have been foreign residents for ten consecutive years or more), are entitled to a tax exemption on income derived outside Israel from any source, or income derived from assets located outside Israel, as well as on capital gains from the sale of assets located outside Israel, for a period of ten years from the date they become Israeli residents. The current law does not provide an exemption for income generated in Israel, including income from personal exertion (active income from business, profession, or employment). Substance of the proposed legislation According to the draft, it is proposed to grant new immigrants and veteran returning residents a tax exemption on a portion of taxable income from personal exertion generated or derived in Israel, for a period of five years (2026–2030), subject to declining exemption caps over the years:

On November 26, 2025, the Ministry of Finance published the Bill on Minimum Corporate Tax in a Multinational Group, 2025 (the “Bill”), aimed at implementing in Israel, the QDMTT mechanism (Qualified Domestic Minimum Top-Up Tax), one of the OECD’s Pillar 2 rules. If enacted, this would mark a significant step in Israel’s adoption of the BEPS (Base Erosion and Profit Shifting) project principles, intended to ensure a uniform minimum tax rate of 15% on the profits of multinational groups operating worldwide. Many countries have already incorporated these principles, some more broadly than Israel intends to do through this Bill.

What Happened?On April 7, 2024, the Knesset passed an amendment to the Income Tax Ordinance, […]

Dramatic Changes Proposed to the Definition of “Israeli Resident” and “Foreign Resident”

Written by Ofir Levy and Ofir Paz In March 2025, the Israeli Knesset approved the […]