For years, Israel’s tax policy for olim (new immigrants) and returning residents rested on a clear divide. Israeli-source income and assets fell within the Israeli tax net. Qualifying foreign-source income and assets, by contrast, generally remained outside it during the 10-year benefit period – and under the former rules, did not need to be reported. This “hands-off” framework enabled relocation to Israel with minimal bureaucracy around overseas wealth.
In 2026, that divide is being redrawn. Israel has introduced a “new carrot”: a time-limited tax break for qualifying Israeli-source active income. At the same time, it has removed the reporting exemption for foreign income and assets for people becoming Israeli residents from January 1, 2026. The result is a more targeted policy: an incentive to move to Israel and work here, coupled with the full disclosure of offshore wealth.
The New Carrot
The “new carrot” is a temporary order under the Law for the Encouragement of Aliyah and Return to Israel. It exempts qualifying Israeli-source employment, business, and professional income for new olim and returning residents who become Israeli residents between November 5, 2025, and December 31, 2026.
The annual income exemption is capped at NIS 600,000 in 2026, NIS 1 million in 2027 and 2028, NIS 350,000 in 2029, and NIS 150,000 in 2030.
Meeting the deadline requires more than filing an aliyah application. Eligibility depends on becoming an Israeli tax resident through a genuine transfer of one’s center of living, reflected in factors such as the timing of the move, a permanent home, and the relocation of personal and family life.
This is not a tax holiday for wealth. Capped and temporary, the “new carrot” targets active Israeli income. It will matter most to upper-middle-class professionals – hi-tech engineers, doctors, scientists, and other skilled workers – building lives and careers in Israel, not high-net-worth individuals whose income comes mainly from Israeli investments, dividends, capital gains, or other passive sources.
Please note that you cannot make a phony aliyah. You must be present in Israel at least 75 days in each of the years 2027 and 2028, or else the Israeli tax you avoided suddenly becomes due.
Jack is a professional who lives in London, earns 250,000 pounds per year, and pays taxes in the UK, up to 45%. He can forego this dubious pleasure in 2027-2028 and pay no tax in either country by making aliyah by the end of 2026 and providing his services from a laptop in Israel, if applicable conditions are met.
The 10-year tax holiday still matters
The “new carrot” has attracted attention, but the core of Israel’s immigration tax regime remains the 10-year exemption for qualifying foreign-source income and assets, including foreign dividends, capital gains, and interest.
For high-net-worth individuals with global portfolios, family trusts, or foreign corporate holdings, the exemption remains central to the financial case for relocating to Israel. But for new residents from 2026, exempt foreign income and assets will no longer benefit from the former disclosure exemption. The tax holiday remains, but with greater visibility to the Israel Tax Authority.
Amendment 272 permanently repeals the reporting exemption for people becoming Israeli residents from January 1, 2026.
The change is not retroactive: those who became Israeli residents before November 5, 2025, remain under the former reporting rules during their benefit period. For later arrivals, qualifying foreign income may remain tax-exempt for 10 years, but it is no longer outside Israel’s field of vision.
New residents should expect to file Israeli tax reports and disclose foreign income, assets, overseas accounts, and foreign entities, even where the income remains tax-exempt. This is especially relevant for family trusts, overseas entities, and other complex foreign structures.
Israel’s 2026 aliyah tax policy is more selective. The “new carrot” offers a short, capped incentive for people who relocate and earn qualifying active income in Israel. At the same time, new residents with substantial foreign wealth must prepare for full disclosure, even though the 10-year exemption for qualifying foreign income and assets remains.
For anyone considering aliyah or a return to Israel – this year in Jerusalem or Tel Aviv?
As always, consult experienced professional advisors in each country concerned at an early stage in specific cases.
moti.balilti@goldfarb.com, leon@hcat.co
Motti Balilti, Adv., is a Partner and tax specialist at Goldfarb Gross Seligman & Co. Leon Harris is a certified public accountant and tax specialist at Harris Consulting & Tax Ltd.