New Disclosure Rules for Olim and Returning Israelis effective 1/1/2026

Re:  New Disclosure Rules for Olim and Returning Israelis effective 1/1/2026

Background

Israel has long offered tax-incentives to new immigrants (olim) and veteran Israeli returning residents.

Historically:

  • Such individuals could benefit from a 10-year exemption from Israeli tax on income sourced abroad (foreign-sourced income) from the date they become a tax-resident.
  • In many cases, they were also exempt from the obligation to file (or report) that foreign-sourced income and foreign assets during that benefit period.
  • For example, foreign companies linked to such persons could, in some cases, avoid Israeli reporting if the income remained abroad.

What changed based on the new rules?

Here are the key changes relevant to disclosure and reporting, especially for olim and returning residents.

  1. Repeal of the reporting exemption
  • A major amendment to the Income Tax Ordinance (New Version) (ITO) was passed on 2 April 2024, which abolished the reporting exemption for new immigrants and veteran returning residents who become Israeli residents on or after 1 January 2026.
  • That means even if they still benefit from the 10-year tax exemption on foreign-sourced income, they will not be exempt from reporting that income or foreign assets to the Israel Tax Authority (ITA).
  • The reporting obligation covers worldwide income and foreign assets/trusts for the relevant individuals. For example, trusts with settlors/beneficiaries who are new immigrants will be subject to reporting.
  • The amendment also empowers the Israeli tax authority to request information from foreign companies managed in Israel by those individuals.
  1. Timing / transitional rules
  • The key date: 1 January 2026. Individuals who become Israeli tax-residents on or after this date (as new immigrants or veteran returning residents) will face the new reporting obligations.
  • Those who became residents before this date retains the older exemption from reporting (for the 10-year benefit period) under the previous rules.
  • Some advisors note you may want to “establish strong ties to Israel” before 31 Dec 2025 to qualify under the older rules.
  1. Tax-incentive refinements – some good news
  • While most relevant to tax (rather than just disclosure) it is worth noting: The tax exemption for foreign-sourced income remains available for new immigrants/returning residents under the 10-year rule.
  • Also, new moves by the Ministry of Finance indicate that for 2026–2027 new arrivals from 2026 may get zero income tax on Israeli-source income initially (and then escalations in following years).   This has not been finalized.

What does it mean for someone making Aliyah or returning?

Here are key practical implications and things to think about.

 Increased disclosure burden

If you become a resident on/after 1 Jan 2026 as a new immigrant or veteran returning resident:

  • You will be required to report your worldwide income and foreign assets/trusts to the Israeli tax authority, even if the assets/income are exempt from taxation under the 10-year regime.
  • You may need to maintain records of foreign companies/trusts controlled by you or you may be a beneficiary and report beneficial-owner details.
  • If you have complex foreign entities, trusts or cross-border structures, you will want to review them carefully with a tax advisor before making Aliyah or returning.
  • You may benefit from the two year Israeli tax exemption should the law pass.

 Opportunity for those landing earlier

  • If you become a resident prior to the 1 Jan 2026 cutoff, you may still benefit from the older regime (reporting exemption for the 10-year benefit period) so timing matters.  On the other hand you may not benefit from the favorable tax treatment in Israel should the law pass related to zero income tax for 2 years for new olim.

Tax-exemption remains

  • It is important to stress: the tax-exemption (on foreign-sourced income / gains) remains (for those eligible) it is the reporting exemption that is being removed.  So, you still will not pay tax on certain foreign income and gains, but you will have to report it.
  • The ITA will have increased power to demand information; this future regulatory regime is more transparent.

Consider what constitutes Israeli “resident” status

  • Your obligations trigger when you become an Israeli tax-resident. Residency tests (“center of life”, day-count, etc.) may shift in future reforms.
  • If you are planning Aliyah, speak with your tax/legal advisors about the precise date you will become a resident and when the 10-year benefit period begins, etc.

Review of your foreign structures

  • If you have foreign trusts, companies, assets: check how they will be treated under the new rules — you might now have to report them, even if they are exempt from tax.
  • Keep up-to-date records including beneficial-ownership information.

Plan timing carefully

  • If you are planning on Aliyah or returning to Israel, the date you land / establish residency matters. If it is after 1 Jan 2026, new rules apply.
  • Consider the pros/cons of arriving earlier vs later, in terms of both tax & disclosure.
  • Keep in mind non-tax factors (absorption benefits, employment, integration) too.

Please contact: Lisa Alter if you have any questions or need clarification about this issue at: 02-568-4637 or email her at:  lisa@ardcpa.com

Tax and Legal Disclaimer: The materials provided in this article and any comments or information provided herein are for educational /discussion purposes only and nothing conveyed or provided should be relied upon as legal, accounting or tax advice for the U.S. or Israel.  Please contact your U.S. and/or Israeli tax attorney or accountant with any specific questions you have related to the information provided that are of a legal, accounting or tax nature.

 

Scroll to Top
Skip to content