In Israel, new immigrants and veteran returning residents are entitled to a wide range of tax benefits designed to ease the acclimatization process and encourage returning to Israel. It is important to understand the difference between the following three statuses:
New Immigrant: A person who arrives in Israel for the first time and receives the status of an Israeli resident.
Returning Resident: A person who returns to Israel after living abroad for at least six consecutive years.
Veteran Returning Resident: A person who returns to Israel after living abroad for at least ten consecutive years.
Tax Benefits for New Immigrants
New immigrants are entitled to many tax benefits designed to facilitate their integration into the Israeli economy:
Exemption from Tax on Foreign Income: New immigrants are exempt from tax on income originating from outside Israel for ten years. The exemption includes income from interest, dividends, capital gains, royalties, and income from work or business conducted for clients outside Israel. The exemption also applies to income from assets purchased abroad and capital gains from the sale of these assets.
Exemption from Reporting Foreign Income: New immigrants are exempt from the obligation to report income and assets originating from outside Israel for ten years.
Tax Credit Points: New immigrants are entitled to tax credit points on their income in Israel. Immigrants who arrived before January 1, 2022, will receive tax credit points for 3.5 years, and immigrants who arrived after this date will receive tax credit points for 4.5 years.
Exemption from Tax on Interest from Foreign Currency Deposits: New immigrants are exempt from tax on interest from foreign currency deposits for twenty years, provided that the source of the funds was in their possession before immigrating to Israel and they are deposited in a financial institution in Israel.
Property Purchase Benefits: New immigrants are entitled to a discount on purchase tax when buying a residential or business property in Israel, provided that the property is intended for the new immigrant's use and is purchased within one to seven years of immigration.
Tax Benefits for Veteran Returning Residents
Veteran returning residents enjoy tax benefits designed to encourage their return to Israel:
Exemption from Tax on Foreign Income: Veteran returning residents are exempt from tax on income originating from outside Israel for ten years. This includes income from interest, dividends, capital gains, royalties, and income from work or business conducted for clients outside Israel.
Exemption from Tax on Capital Gains from the Sale of Overseas Assets: Veteran returning residents are exempt from tax on capital gains from the sale of assets purchased while abroad for ten years. After this period, a partial exemption will be granted on profits accumulated after the end of the period.
Tax Relief on Foreign Pensions: Veteran returning residents are entitled to tax relief on income from foreign pensions, ensuring that the total tax on the pension does not exceed the tax that would have been paid if they had remained residents of the original country.
Benefits for Foreign Companies Owned by Veteran Returning Residents: Companies owned by veteran returning residents will not be considered Israeli companies for tax purposes, provided they are managed outside of Israel, for ten years.
Adjustment Year
New immigrants and returning residents can request a "year of adjustment" during which they will not be considered Israeli residents for tax purposes. After this year, if they decide to remain in Israel, they will enjoy all the benefits outlined above.
These benefits are intended to ease the transition to Israel and encourage the decision to make aliyah or return to Israel after many years abroad. These significant benefits can greatly assist in easing the transition and economic acclimatization in Israel.
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