Starting January 1, 2026, new immigrants (olim hadashim) and returning residents will lose the exemption from reporting their foreign income.
While the ten-year tax exemption on foreign-sourced income remains as was, fiscal transparency will now be mandatory: all income, assets, or holdings abroad must be reported to the Israeli Tax Authority.
This reform signifies the end of the “tax secrecy” established by the 2008 law, which aimed to encourage alyah and attract foreign capital. For ten years, new Immigrants enjoyed a double exemption: both from paying taxes and from the obligation to report their foreign incomes.
A PARADIGM SHIFT UNDER INTERNATIONAL PRESSURE
The decision, adopted in April 2024, comes amid increasing pressure from the OECD and the European Union, which had threatened to place Israel on the blacklist of non-cooperative jurisdictions regarding tax transparency.
Israeli authorities therefore chose to align with international standards to avoid economic sanctions or reputational damage.
This change also responds to domestic criticism: several institutions, including the State Comptroller’s Office, warned that the scheme could serve as a haven for funds of questionable origin.
WHAT WILL CHANGE IN PRACTICE FROM 2026
From January 1, 2026:
- Mandatory reporting: all new residents and returning residents must declare their foreign income, assets, and holdings;
- Tax exemption maintained: income earned abroad will remain tax-free for ten years, but must still be reported;
- Official objective: strengthen tax transparency, prevent money laundering, and align Israel with international standards.
CHALLENGES AND CONCERNS FOR TAXPAYERS
Although the tax exemption remains an advantage, the end of tax secrecy raises several concerns:
- Loss of financial confidentiality, particularly for taxpayers with significant international assets;
- Increased administrative complexity due to the preparation of international tax reports;
- Fear of stricter tax audits and restrictive interpretations by the authorities.
Experts also foresee potential disputes regarding the definition of “foreign-sourced income,” especially in cases involving investment portfolios or multinational companies.
ASSULINE & CO’S RECOMMENDATIONS
In light of these developments, careful tax planning is essential.
Our experts advise future immigrants to:
- Anticipate their alyah before 2026 to retain full benefit from the current regime.
- Consider waiving the adaptation year (shnat histaglut) if immigrating in 2025, to avoid their tax status taking effect only in 2026.
- Prepare a detailed mapping of all income, companies, and assets held abroad.
- Consult a certified accountant specializing in international taxation and tax treaties to secure their situation before the regime change.
CONCLUSION: TURNING A CONSTRAINT INTO AN OPPORTUNITY
The end of the reporting exemption signifies a new era of tax transparency in Israel. For new Immigrants, this should not be seen as a deterrent but as a directing of attention and optimization.
Assuline & Co, accounting firm specializing in international taxation, assists clients at every stage of their relocation project:
from preliminary wealth analysis to full tax compliance – to turn this reform into a strategic opportunity rather than an administrative constraint.