Residents Arriving in Israel After January 1, 2026 – Balancing Aliyah Incentives with Tax Transparency

Following an amendment to Israel’s Income Tax Ordinance, the reporting exemption previously available to new immigrants ("OLE HADASH") and veteran returning residents will be revoked. The tax exemption on foreign income will, at least formally, remain in place — yet the amendment will enable the tax authorities to challenge the source or nature of income, for example, by claiming the existence of a permanent establishment in Israel. This change marks the beginning of a new era of full transparency under the OECD and CRS international standards, requiring early planning for anyone intending to immigrate to Israel after January 1, 2026.

Dr. Arye Leybovich, Adv.

A Fundamental Change Effective December 31, 2025

The tax status of new immigrants (olim hadashim) and veteran returning residents will undergo a major transformation beginning December 31, 2025.
On that date, Amendment No. 272 to the Israeli Income Tax Ordinance will come into force.

On one hand, the amendment preserves the ten-year exemption from Israeli tax on foreign-source income and assets for both groups — including those immigrating after December 31, 2025.
On the other hand, it abolishes the long-standing reporting exemption, which previously allowed such individuals to refrain from reporting their foreign income or assets during the exemption period.

Expanded Authority of the Tax Assessor

The amendment also grants the Assessing Officer (Tax Assessor) explicit authority to demand information and reports from foreign companies that may be considered effectively managed and controlled from Israel by a new immigrant or returning resident.

At first glance, one might ask: What has really changed? After all, the exemption from tax remains. The answer is straightforward: the moment tax authorities gain a “thread to pull,” they will have grounds to argue that:

  • certain business activities are in fact managed from within Israel;
  • foreign companies are effectively Israeli-resident entities, fully taxable under Israeli law; or
  • at the very least, those foreign structures maintain a permanent establishment in Israel, subjecting a portion of their income to Israeli taxation.

In practice, the elimination of the reporting exemption provides the Israel Tax Authority with a new gateway for enforcement and a stronger legal basis to challenge foreign income structures.

Policy Rationale and International Context

The background to this reform lies in international demands — led by the OECD — to enhance fiscal transparency and align Israel with the global framework for automatic exchange of financial information under the Common Reporting Standard (CRS), which Israel has signed and implemented.

Amendment 272 thus represents Israel’s full commitment to international transparency and anti-evasion standards, closing the remaining gap between Israel and other OECD member states.

How to Prepare – Professional Pre-Immigration Planning Is Essential

Individuals planning to immigrate to Israel after January 1, 2026 should begin preparing well in advance.
The forthcoming amendment fundamentally changes how the Israeli Tax Authority interacts with new residents, and proactive planning can make the difference between full compliance and costly exposure.

Proper preparation should include:

  • a detailed review of foreign companies, partnerships, and trusts,
  • an analysis of whether “management and control” could be deemed to occur from within Israel,
  • structuring investments and business operations to avoid being classified as Israeli-resident entities, and
  • coordinating compliance with the new reporting obligations introduced by Amendment No. 272.

These steps are especially important for U.S. citizens and other foreign nationals who may be subject to dual reporting under FATCA, CRS, or international tax treaties.

At our offices, we assist clients from the U.S., Europe, and other jurisdictions in planning their relocation to Israel through:

  • comprehensive pre-immigration tax reviews,
  • alignment of global assets and trust structures with Israeli law, and
  • preparation of tailored strategies that ensure transparency while preserving the available ten-year exemption.

If you or your family members considering Aliyah or a return to Israel after January 1, 2026, we invite you to schedule a preparatory consultation with our international tax and also trust experts.
A short planning process before your move can prevent years of complications — ensuring that your transition to Israel is both legally compliant and tax-efficient under the new reporting regime.

In summary:
While Israel continues to encourage Aliyah through generous tax exemptions, the era of “no reporting, no questions asked” is coming to an end.
From 2026 onward, transparency will be the rule — not the exception.

Author: Dr. Arye Leybovich, Attorney

(Author of The Encyclopedia of Tax Treaties, The Encyclopedia of Trusts and Trust Taxation, and Tax Treaty Comparative Tables; Former President of the Israeli Trustees Association, and former Chair and Vice-Chair of the Trusts and Tax Committees of the Israel Bar Association.)

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