New Tax Incentives for New Immigrants and Veteran Returning Residents
We wish to inform you that, the Israeli legislature enacted the Law for the Encouragement of Immigration to Israel and Return Thereto (Temporary Provision), 5786–2026 (the "Law").
The Law introduces new income tax exemptions applicable to New Immigrants and Veteran Returning Residents, in respect of qualifying income generated in Israel, in addition to the existing tax benefits applicable to foreign‑source income.
Eligible Individuals
The tax benefits are available to individuals meeting one of the following definitions:
New Immigrant - An individual holding a New Immigrant Visa or New Immigrant Certificate pursuant to the Law of Return, or entitled to an immigrant absorption package, excluding individuals whose Israeli citizenship was revoked under the Nationality Law.
Veteran Returning Resident - An individual who was classified as a foreign resident for a period of at least ten (10) consecutive years and who holds a Veteran Returning Resident certificate issued by the Ministry of Aliyah and Integration.
Eligibility Period
The tax benefits apply to a New Immigrant who becomes an Israeli tax resident for the first time, or to a Veteran Returning Resident who returns to Israel, during the period between 5 November 2025 and 31 December 2026.
Nature of the Tax Benefit
An exemption from Israeli income tax on "Qualifying Income" that accrued or was generated in Israel during the 2026 through 2030 tax years.
"Qualifying Income" – generally, refers to income subject to Israeli tax under Sections 2(1) or 2(2) of the Income Tax Ordinance (earned income from employment, business or profession), excluding "Oter Income" (passive income, including interest, linkage differentials, discount income, dividends, rental income, capital gains, securities transactions and real estate transactions), and excluding income derived through a "Transparent Entity" (as defined in the law, other than income attributed to a controlling shareholder of a so‑called "wallet company".
Annual Exemption Caps
The exemption is subject to the following annual income caps:
Tax Year 2026 – up to NIS 600,000 (pro‑rated based on the period of Israeli tax residency).
Tax Years 2027–2028 – up to NIS 1,000,000 per year.
Tax Year 2029 – up to NIS 350,000.
Tax Year 2030 – up to NIS 150,000.
Reduced Exemption Cap – Related Party Income
Where Qualifying Income is received from a related party, the exemption cap is limited to NIS 140,000 per year for each of the 2026 through 2029 tax years.
Foreign Resident Entity Exemption
During the 2026–2030 tax years, a foreign‑resident entity may be exempt from Israeli income tax on Israeli‑source income attributable solely to the personal services rendered in Israel by a New Immigrant or Veteran Returning Resident.
The exemption shall not apply where the individual is a Substantial Shareholder of the foreign entity. In the case of a transparent entity, the exemption shall not apply to income attributed to the rights of the Israeli resident, subject to statutory conditions.
Minimum Physical Presence Requirement
The tax benefits will be retroactively cancelled from their commencement date if the individual ceases to be an Israeli tax resident during the 2028 or 2029 tax year and is physically present in Israel for fewer than seventy‑five (75) days in either of those years.
We would be pleased to provide specific advice and to examine eligibility for the above tax benefits, including their interaction with other immigration tax incentives and applicable tax treaties.
