Dear clients ,
We would like to inform you that the Law Encouraging Immigration to Israel and Returning Thereto (Temporary Provision), 2026 – has been published, which aims to encourage immigration to Israel and return to Israel, by granting tax exemption on certain types of income generated in Israel, to new immigrants and long-time returning residents, subject to the conditions and limitations set forth in the law.
The main provisions are as follows:
1. Who is eligible for the benefit
The benefit applies to:
An immigrant who became a resident of Israel for the first time in the period from November 5, 2025 until the end of the 2026 tax year; (the determining period for eligibility for tax benefits).
A long-time returning resident, an individual who was a foreign resident for at least 10 years who became a resident of Israel again during that period, provided that he or she holds a returning resident certificate issued by the Ministry of Immigration and Absorption.
2. What income does the exemption apply to?
The exemption applies to qualifying income, which is primarily taxable income from personal income under Section 2(1) or 2(2) of the Income Tax Ordinance, which was produced or accrued in Israel while the individual was a resident of Israel.
However, the law specifically excludes certain types of income, including:
• Other income as defined in Section 62A(d) of the Ordinance (passive income such as interest, dividends, rent, capital gains).
• Income attributable to an immigrant or a returning resident from a transparent corporation, except for income from a transparent corporation attributable to an immigrant or a returning resident under Section 62A of the Ordinance.
3. Exemption ceilings by tax year
According to the temporary provision, the tax exemption on qualifying income will apply up to the following ceilings:
• Year 2026: up to 600,000 NIS
• Years 2027 and 2028: up to 1,000,000 NIS per year
• Year 2029: up to 350,000 NIS
• Year 2030: up to 150,000 NIS
4. Income from close relatives, limited ceiling
When it comes to qualifying income received from close relatives, a lower ceiling will apply:
• In tax years 2026 to 2029: up to 140,000 NIS per year
If in the same tax year there are both regular income and income from close relatives, eligibility will be examined according to the types of income, but in any case the total exempt income will not exceed the general ceiling Annual.
5. Year 2026, Proportional Calculation
For tax year 2026 only, the exemption ceiling will be calculated proportionally to the period of residency in Israel during that year.
That is, someone who became a resident of Israel during 2026 will not necessarily be entitled to the full ceiling for 2026, but to a proportional ceiling according to the duration of his residency in Israel that year.
6. Exemption also for a foreign resident member of the family, under certain conditions
The law also includes a provision according to which the income from a business of a foreign resident member of the family, which was generated in Israel due to the personal efforts of an immigrant or a returning resident, may be exempt from tax in tax years 2026 to 2030.
However, the said exemption will only apply if, but for the personal efforts of that immigrant or returning resident, that member of the family would not have had business income generated in Israel.
The exemption will not apply, inter alia, in the following cases:
• If the immigrant or returning resident The veteran is a substantial shareholder in the same group of people who is a foreign resident
• If it is a transparent corporation, in relation to the portion of income attributed to the rights holder who is a resident of Israel
7. Important qualification for applicability
The law states that the benefits will not apply to an individual who ceased to be a resident of Israel during one of the tax years 2028 or 2029, and stayed in Israel for less than 75 days in one of those years.
This is a substantial qualification, which can negate the applicability of the benefit in cases of early termination of residency or limited stay in Israel.
8. Observance of laws
This benefit will be granted in addition to, and in parallel with, the tax benefits that already exist today for new immigrants and returning residents, such as tax exemption on income outside of Israel for certain periods, and tax credit points.
Therefore, the overall benefit system must be examined in each case, including existing provisions in the ordinance, and not be satisfied with examining the temporary provision alone.
9. Commencement and applicability
Commencement The law will come into effect on January 1, 2026.
It will apply to income from a right that was generated or accrued in Israel, starting from the date the immigrant became an Israeli resident for the first time or from the date the long-time returning resident became an Israeli resident again, as the case may be.
10. Practical highlights
In light of the complexity of the definitions and conditions, it is recommended to examine in advance, among other things:
• Does the individual fit the definition of an immigrant or a long-time returning resident
• What is the relevant date of residency for the purposes of the law
• Is this qualifying income or income that was excluded from the benefit
• Is there any income from close relatives
• Is a transparent corporation or a group of people who are foreign residents involved
• Are there implications for tax planning, activity structure, reports to the Tax Authority and required documentation
We recommend that anyone who believes that the law may apply to them, seek an individual examination, before making aliyah, returning to Israel, starting business activity in Israel or receiving income during the benefit period.
For further details and examination For details of the application of the instructions in your case, please contact our office.
For a temporary instruction, click [here]
At your disposal for any questions.
Stark and Stark CPA.
