The tax system of Israel is quite complicated and confusing, while the total percentage of deductions is several times higher than that of most countries. To prevent this news from becoming a real shock for the newly arrived residents of Israel, the government, in particular the Ministry of Absorption, has long before developed a number of tax incentives for the new repatriates (olims), which help them to get used to the established tax system painlessly. Let’s try to figure out what kind of relief can be expected by this category of citizens and who fall into this category.
The list of tax benefits for new repatriates:
Exemption from income tax on all receipts from abroad, as well as from filing of declarations and other reports on such enterprises. What does it mean? So, if at the time you moved to Israel you already owned a business or part of the stock of some company, then such company would not be considered as belonging to an Israeli resident and, accordingly, the income from its activities and the dividends received will not be taxed. Also, it will not be necessary to submit annual reports and declarations to state bodies, which considerably removes the administrative burden from the owner. The term of such a huge tax benefit is 10 years from the moment of repatriation. Absolutely according to the same scheme operates a preferential system of taxation on other income of returnees received from abroad (investments, income from rent and sale of property, fees, etc.). Whereas disputes on the question of declarations and reporting arise regularly and theoretically cancellation of this rule is possible (after all, according to opponents of this tax benefit for new repatriates without fiscal control over such companies, the possibility of illegal circulation of money is created), the norm on exemption of such companies from taxes is not about to be raised even in the long term. Anyway, it is necessary to do the bookkeeping correctly and be ready to work closely with the tax authorities. For more details about bookkeeping refer to the link.
During ten years after the arrival of new repatriates in the country, the amount of taxes on pensions and other benefits received from abroad will not exceed the tax that would have been paid if he had remained a resident of that country.
Exemption from the payment of tax on profits from savings in foreign currency. This norm is valid for 20 years from the date of repatriation. So, if the basic capital of savings was collected abroad before moving home, and the account itself was opened in an Israeli bank, the newcomer has the right to preferential tax treatment on the profit from these deposits.
Acquisition of Nekudot Zikuy for payment of income tax. These are peculiar preferential units, with the help of which it is possible to substantially reduce the amount of such revenue charges. So, in the first year after the repatriation, the new Israeli has the right to receive 3 Nekudot zikuy, the next year – 2 and in a third year – one. The amount of this preferential unit is quite considerable and changes every year. So, for example, in 2024 it was equal to 2904 shekels.
Adaptation period of 1 year. Each Israeli newcomer or returnee to a permanent place of residence has the right to make use of shnat histaglut. This is a kind of test period lasting one year, during which you will not be considered by the Tax Authorities of the country as a resident of Israel. At the end of this period, you may decide either to stay and take advantage of tax benefits for new repatriates or leave the country.
Thus, there are a lot of state indulgences for the newly arriving residents of Israel. All of these help the new repatriates to better adapt in the country and settle down with minimal problems. More details about how to open a new business, recover the previously paid taxes and successfully adapt in Israel, you can learn by contacting the expert rohe heshbon Shmuel Brodetski.
