Israel offers 5-year tax break on local income for olim and returning residents

Israel offers 5-year tax break on local income for olim

How the tax break works

Israel now exempts eligible olim and veteran returning residents from tax on Israeli-sourced personal services income for 5 years, covering wages, freelancing and self-employment. The measure applies to people who became tax residents between Nov. 5, 2025 and Dec. 31, 2026 and it sits on top of the existing 10-year exemption for foreign-sourced income.

The Knesset approved the change on March 30, 2026, as part of the 2026 state budget. Annual caps vary by tax year, starting with NIS 600,000 in 2026 on a pro-rated basis, then NIS 1 million in 2027 and 2028 before dropping to NIS 350,000 in 2029 and NIS 150,000 in 2030.

Who qualifies

The break covers new immigrants with an oleh visa and veteran returning residents who spent 10 years or more abroad and receive a certificate from the Ministry of Aliyah and Integration. It can apply to remote workers, freelancers and other professionals earning local income, as long as they become Israeli tax residents in the eligible window.

Passive income such as rent and dividends isn't covered. Foreign companies can also benefit when eligible individuals generate Israel-source income through their work and related-party income faces a lower cap of NIS 140,000 a year through 2029.

What to do next

Eligible arrivals need the right immigration status, tax residency and a filing with the Israel Tax Authority to claim the exemption. They still have to report foreign income and assets, even though the tax break on foreign-sourced income remains in place.

There’s one catch: if a taxpayer spends fewer than 75 days in Israel in 2028 or 2029, the law bars retroactive benefit for those years. Read our full Israel guide for the complete picture and check our visa updates page for more policy changes.