The Israeli government has recently published a series of proposals intended to support and encourage individuals who wish to make Aliyah during the 2026 tax year. Although these measures have not yet advanced to full draft legislation, the emerging framework provides a clear indication of the direction policymakers are taking. For many prospective immigrants and veteran returning residents, these developments may influence not only whether to make Aliyah, but when to do so.
Why New Benefits Are Being Introduced
In the aftermath of the sharp global rise in anti-Semitic incidents, particularly since October 2023, Israel anticipates that many high-income professionals and families may consider relocating to Israel. Recognizing the valuable economic contributions of such individuals, the government aims to make Aliyah more attractive by offering meaningful, time-limited tax incentives.
These proposals are part of the broader 2026 state budget discussions and reflect Israel's intention to remain competitive in drawing talent and investment.
Who Qualifies for the New Incentives?
The benefits apply exclusively to individuals who become Israeli tax residents during the 2026 tax year, and who qualify as first-time residents, or veteran returning residents (individuals who lived abroad for at least ten consecutive years before returning).
Only those who immigrate to Israel in 2026 may be entitled to the new Israeli-sourced earned income exemptions. However, the government is expected to issue regulations for people who already reside in Israel but will formalize their status in 2026.
The New Exemptions on Israeli-Sourced Earned Income
Under the proposal, the eligible individuals described above will receive a multi-year exemption on Israeli-sourced earned income, up to the following annual ceilings:
- 2026–2027: up to NIS 1,000,000 per year
- 2028: up to NIS 600,000
- 2029: up to NIS 350,000
- 2030: up to NIS 150,000
Income earned beyond these thresholds will be taxed under Israel's standard progressive brackets, while still benefiting from regular personal credits and deductions.
These new tax benefits particularly favor professionals such as engineers, entrepreneurs, software developers, and other high-earning individuals whose Israeli income is expected to be substantial.
There may be restrictions where income appears artificially inflated, for example, payments from relatives or controlled companies.
The potential impact on National Insurance (Bituach Leumi) has not yet been clarified.
Continued Benefits on Foreign-Sourced Income
These new provisions are in addition to the longstanding benefit granted to first-time residents and veteran returning residents: a 10-year exemption on foreign-sourced income (including income from assets and activities abroad).
However, the reporting rules are changing significantly (as shared in previous article).
Major Shift: Worldwide Reporting Obligations Beginning 2026
A 2024 legislative amendment abolished the previous exemption from reporting foreign assets and income. As a result:
- Anyone becoming a first-time resident or veteran returning resident on or after 1 January 2026 must file full annual reports to the Israel Tax Authority (ITA) covering worldwide income and assets, even if such income is exempt from Israeli tax.
- Only those who become Israeli residents on or before 31 December 2025 retain the former reporting exemption.
To implement these rules, the ITA has published a draft circular detailing filing requirements, including:
- Mandatory disclosure of all foreign-sourced income on a designated form attached to the annual tax return.
- Classification of income according to Israeli tax rules, unless the income is also reported in a tax-treaty jurisdiction, in which case that country's reporting can guide the classification.
- Additional reporting for foreign companies, controlled foreign corporations, family companies, trusts, U.S. LLCs, and foreign assets included in capital declarations.
These requirements significantly expand transparency obligations for new residents starting in 2026.
Choosing Between Pre-2026 and 2026 Aliyah: Key Considerations
Individuals weighing Aliyah must now evaluate the trade-off between two different benefit structures:
Aliyah by the end of 2025
- Advantages:
- Exemption from reporting worldwide assets and income.
- Full 10-year exemption on foreign-sourced income.
- Limitations:
- No access to the proposed Israeli-source earned income exemption (2026–2030).
Aliyah during 2026
- Advantages:
- Multi-year exemption on Israeli-sourced earned income, potentially worth hundreds of thousands of shekels annually.
- Full 10-year exemption on foreign-sourced income remains available.
- Limitations:
- Full worldwide reporting obligations to the ITA beginning in 2026.
- Residency dates may be scrutinized, making careful planning essential.
The optimal approach varies widely based on an individual's professional profile, asset structure, expected income sources, and long-term plans.
Looking Ahead
These proposals are still at an early stage and may evolve as the legislative process unfolds. Nevertheless, they signal a clear effort by the Israeli government to strengthen its appeal to skilled professionals and returning residents in the coming years.
Anyone considering Aliyah should begin planning well in advance, particularly given the interplay between tax benefits, reporting duties, and residency determination rules.
If you are exploring Aliyah or evaluating the most advantageous timing for your move, you are warmly invited to contact me for tailored guidance based on your specific circumstances.
Adv. Assaf Hasson is a Wealth Advisor, Tax and Private Client Lawyer.
He is a board member of the ESRA Executive and of the Finance Committee.
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