Living in Israel as an Expat: The 10-Year Tax Exemption for New Residents

Israel is a unique destination on the international wealth planning map. A developed, innovation-driven economy — the "Start-Up Nation" — with a world-class higher education system, strong cultural and familial ties to Jewish diaspora communities globally, and one of the most remarkable tax incentives for new residents available anywhere in the world: a 10-year exemption from Israeli tax on all foreign-source income and assets.

For Jewish families from the UK, USA, France, South Africa, and elsewhere who are considering aliyah (Jewish immigration to Israel) for personal or security reasons, understanding the financial dimensions of the move is as important as any other aspect of planning.

This guide covers the tax exemption in detail, alongside banking, property, and financial planning considerations for expats and new immigrants.

The 10-Year Tax Exemption: How It Works

Under Israeli income tax law (specifically, the Income Tax Ordinance as amended in 2007 and further modified), new immigrants (olim chadashim) and returning residents (toshav chozer) who have not been Israeli tax residents for at least 10 years receive a 10-year exemption from Israeli income tax, capital gains tax, and reporting obligations on all foreign-source income and assets.

Who qualifies?

• New immigrants (Oleh Chadash): Any person who emigrates to Israel and receives an immigrant visa (teudat oleh), who was not an Israeli tax resident in the 10 years prior to becoming resident
• Returning residents: Israeli nationals (or former residents) who were abroad for at least 10 consecutive years and return to Israel as tax residents

What is exempt?

During the 10-year benefit period, the following are exempt from Israeli income tax and capital gains tax:

• All foreign-source income: dividends from overseas shares, interest from overseas bank accounts, foreign rental income, foreign employment income, business income from outside Israel
• Capital gains from selling foreign assets: shares, property, bonds, businesses — all held outside Israel
• Foreign asset reporting: the exemption includes no obligation to report the existence or value of foreign assets to the Israeli Tax Authority (ITA)

This is a remarkably comprehensive exemption. Unlike the UK's former remittance basis — where foreign income was only sheltered from UK tax if it was not remitted to the UK — Israel's exemption has no remittance restriction. Foreign income and gains can be freely brought into Israel in any amount without triggering Israeli tax.

Israeli-source income during the benefit period is taxed normally under Israeli progressive income tax rates.

What happens after 10 years?

After the 10-year period, worldwide taxation applies. At that point, all global income and assets are within the Israeli tax system. Planning for this transition is important for those with significant overseas assets — particularly capital gains that have accumulated during the exempt period.

Israeli Personal Income Tax

For income taxable in Israel (Israeli-source income, or all income after the 10-year period), progressive rates apply:

• NIS 0–81,240: 10%
• NIS 81,241–116,400: 14%
• NIS 116,401–187,440: 20%
• NIS 187,441–260,520: 31%
• NIS 260,521–541,080: 35%
• Above NIS 541,081: 47%

Plus health insurance contribution: approximately 3.1–5% of income (National Insurance Institute, Bituach Leumi)

Capital gains tax: 25% for individuals; higher for controlling shareholders in certain circumstances.

No inheritance tax applies in Israel. Assets passing on death are not subject to Israeli estate duty.

Aliyah Process and Eligibility

Aliyah (literally "ascent") is the Hebrew term for Jewish immigration to Israel under the Law of Return. Under this law, Jewish individuals and their spouses, children, and grandchildren are entitled to immigrate to Israel and receive Israeli citizenship.

The Jewish Agency for Israel (Sochnut) facilitates aliyah for those abroad. The process involves:

• Demonstrating eligibility under the Law of Return (Jewish heritage, conversion, or relevant family connection)
• Filing an aliyah application via the Israeli consulate or embassy in your home country
• Receiving a teudat oleh (immigrant certificate) and Israeli citizenship upon arrival
• Registering with the Ministry of Interior

Aliyah benefits include:

• Israeli citizenship from day of arrival
• Significant financial benefits: sal klita (absorption basket) — a cash payment and subsidised language courses
• Discounts on customs duty on imported personal goods
• Various housing assistance programmes
• Access to the 10-year tax exemption from the date of becoming an Israeli tax resident

Banking in Israel

Israel's banking sector is well-developed and dominated by five main banks: Bank Leumi, Bank Hapoalim, Bank Mizrahi-Tefahot, Discount Bank, and First International Bank. Digital banks (like Bank Yahav, which focuses on specific sectors) are also available.

For new immigrants, the main banks offer oleh accounts with initial benefits such as reduced fees. Opening an account requires an Israeli ID (teudat zehut), teudat oleh, and address confirmation.

International banking is well-integrated — SWIFT transfers to and from overseas accounts are standard, and major credit cards are widely accepted. Foreign currency accounts (USD, EUR, GBP) can be held at Israeli banks.

Capital markets: The Tel Aviv Stock Exchange (TASE) is an active market with hundreds of listed companies. Israeli technology companies — many also listed on NASDAQ — are a significant feature of the local investment landscape.

Property in Israel

Israel's property market has experienced extraordinary price growth over the past 20 years, driven by population growth, shortage of buildable land, and chronic under-supply. Jerusalem and Tel Aviv are among the most expensive cities in the Middle East and comparable to many European capitals.

As of 2026, indicative prices:

• Tel Aviv prime (city centre, sea area): NIS 40,000–80,000/sqm
• Tel Aviv general residential: NIS 25,000–45,000/sqm
• Jerusalem (Rehavia, German Colony, Talbieh): NIS 30,000–60,000/sqm
• Herzliya Pituach (luxury, north of Tel Aviv): NIS 30,000–50,000/sqm
• Periphery (Beersheba, Haifa): NIS 8,000–18,000/sqm

Foreign buyers: Non-residents can purchase Israeli property, though acquisition tax (mas rechisha) applies at rates of 8% on the first NIS 5,872,725 and 10% above that for those purchasing as a foreign resident. For Israeli residents and new olim purchasing a first home, reduced rates apply.

New olim are entitled to a one-time reduction in acquisition tax — a significant benefit that should be used strategically.

Property held in trust: Israeli property held by a foreign trust (e.g., a UK family trust) can face specific Israeli tax treatment — take advice if this applies.

UK Tax Considerations for British Olim

For British nationals making aliyah, UK tax obligations do not simply disappear.

UK tax residency: HMRC's Statutory Residence Test determines UK residency. If you meet the test conditions for non-residence (typically spending fewer than 46 days in the UK in the tax year and having few UK ties), you cease to be UK-resident and UK income tax does not apply to non-UK income.

UK inheritance tax (residence-based since 6 April 2025): The UK abolished the domicile-based system from 6 April 2025. Exposure to UK Inheritance Tax on worldwide assets is now determined by long-term UK residence — broadly, you remain a "long-term resident" (and within UK IHT on worldwide assets) if you have been UK-resident for at least 10 of the previous 20 tax years. After leaving the UK, this status persists for a number of years (a "tail" of up to 10 years, depending on how long you were resident) before worldwide assets fall outside the UK IHT net. UK situs assets (such as UK property) remain within UK IHT regardless. IHT planning for individuals with significant global assets remains important even after aliyah.

UK pension income: Under the UK-Israel DTA, UK pension income (other than government service pensions) paid to Israel-resident individuals may be taxable in Israel — but the 10-year exemption means it is generally not taxed in Israel during the benefit period. Take specialist advice on the interaction between the DTA and the exemption.

UK ISAs, offshore bonds, and investments: During the 10-year Israeli exemption, these can continue to accumulate without Israeli tax — a powerful combination. Plan the interaction carefully before the 10-year period ends.

Security Considerations

It would be incomplete not to acknowledge the geopolitical and security environment. Israel has experienced significant military conflict in the region, most recently the events of October 2023 and the subsequent war in Gaza. This has implications for:

• Physical safety in specific areas
• International insurance pricing (life, health, property)
• Investment risk — Israeli asset prices are affected by conflict events
• Business continuity planning for Israeli or international business operations

These are real considerations that HNW individuals and families making aliyah or investing in Israel must factor into their planning alongside the substantial financial benefits.

Financial Planning Checklist for Israel Expats / Olim

1. Confirm aliyah eligibility and begin the process through the Jewish Agency if relevant
2. Plan UK departure — HMRC SRT conditions; notify HMRC via P85
3. Understand the 10-year exemption start date and plan offshore income/gains management
4. Consider holding large unrealised gains in offshore accounts — do not crystallise unnecessarily before the 10-year period ends
5. Plan what to do as the 10-year period approaches its end — consider timing of large disposals
6. Open Israeli bank accounts; obtain Israeli ID
7. Register with Bituach Leumi (National Insurance Institute) for health and social security
8. Utilise olim property acquisition tax discount strategically
9. Draft an Israeli will; coordinate with UK will and IHT planning
10. Seek advice on UK domicile and IHT position if UK-domiciled with significant wealth

Compliance Reminder

Israel's 10-year exemption is generous but has specific conditions. After 10 years, full worldwide taxation applies and advance planning is critical. The UK-Israel DTA and its interaction with the exemption require specialist advice. Political and security conditions in Israel can change. This guide reflects the position as of 2026. Investment and property values can fall as well as rise.

How Global Investments Can Help

Global Investments has experience advising Jewish diaspora clients considering aliyah and internationally mobile individuals exploring Israel's 10-year tax exemption. We provide UK exit planning, offshore investment management during the exempt period, pension structuring, estate planning, and holistic cross-border financial advice. Contact us for a confidential discussion.