Aliyah Tax Reform 2026

The Aliyah Tax Reform 2026 is the structural reform to Israeli tax treatment of new olim and veteran returning residents, approved by the Knesset on March 30, 2026. The eligibility window runs from November 5, 2025 through December 31, 2026, for anyone who becomes an Israeli tax resident in that period, and the reform operates on three distinct layers.

Layer One: The Five-Year Capped Israeli-Source Exemption

Eligible individuals, new olim holding an oleh visa and veteran returning residents who lived outside Israel at least ten consecutive years, receive an exemption on Israeli-source income from personal services (salary, self-employment and business income) for five years, according to law firm Herzog Fox & Neeman. The exemption is capped at declining annual amounts rather than a flat rate or flat percentage: up to NIS 600,000 in 2026 (prorated to actual residency days that year), NIS 1,000,000 in each of 2027 and 2028, NIS 350,000 in 2029, and NIS 150,000 in 2030. Where the eligible individual is employed by a relative, the cap drops to NIS 140,000 a year. The exemption does not cover passive income such as rent, interest, dividends or capital gains, and a parallel provision exempts qualifying foreign companies from Israeli tax on income generated solely through an eligible individual's personal activity in Israel, unless that individual holds 10% or more of the company.

Layer Two: The Unchanged Ten-Year Foreign-Source Exemption

The pre-existing ten-year exemption on worldwide foreign-source income for new olim and returning residents survives the reform unchanged: dividends, interest, capital gains on foreign assets, foreign business income and most foreign pensions remain untaxed in Israel for the full ten years, stacking on top of, rather than replacing, the new five-year Israeli-source benefit.

Layer Three: The Worldwide Disclosure Regime

A separate amendment to Israel's Income Tax Ordinance, enacted April 2, 2024 in response to recommendations from the Global Forum on Transparency and Exchange of Information for Tax Purposes, abolished the long-standing reporting exemption for new olim and returning residents who become Israeli residents on or after January 1, 2026. From that date, eligible individuals must file Form 150 disclosing worldwide income and foreign assets, with reporting obligations extending to foreign companies they control and trusts in which they serve as settlor, protector or beneficiary. Anyone who became an Israeli resident before December 31, 2025 keeps the older regime's reporting exemption for the remainder of their ten-year window; the favorable tax treatment is preserved for later arrivals, but the reporting privacy enjoyed by prior cohorts is removed.

How Does This Interact With Other 2026 Olim Benefits?

In February 2026, the Knesset separately passed Amendment 262 to the National Insurance Law, giving new olim from the United States a five-year exemption from Bituach Leumi (Israeli National Insurance) contributions on income for which they already pay U.S. Social Security tax, addressing the absence of a US-Israel social security treaty. That exemption covers National Insurance contributions only, not Bituach Briyut health insurance, and runs independently of the three-layer income tax package.

Who Is Excluded From the Reform?

Eligibility requires genuine new oleh status or returning-resident status with the full ten-year prior absence from Israel; returning citizens who fall short of that absence requirement cannot access the package regardless of when they return. The reform has anchored substantial pre-aliyah restructuring activity among high-net-worth prospective olim through 2025 and 2026, as advisors have urged clients to weigh the trade-off between arriving before the 2026 disclosure cutoff, preserving reporting privacy, versus arriving within the window to capture the new Israeli-source exemption.

Read Next in The Olam

• Ten-Year Foreign-Source Exemption · Worldwide Disclosure Regime — Layers two and three of the package
• Aliyah · Olim · Returning Resident — Eligibility categories
• Family Office Migration — Pre-aliyah restructuring practice
• FATCA · US-Israel Tax Treaty — Cross-border interactions