Financial Planning in Israel: A Guide for Expats and International Investors

Israel is a high-income OECD member with a dynamic, innovation-led economy and a tax framework that offers one of the most generous incentives for new immigrants and returning residents anywhere in the world: a ten-year exemption on foreign-source income and gains for qualifying individuals making Aliyah (Jewish immigration) or returning after a decade abroad. This exemption, combined with Israel's world-class technology sector (Tel Aviv is consistently ranked among the top global startup ecosystems), its common law-influenced legal system, and its cultural and historic significance, creates a distinctive planning environment.

Financial planning in Israel is not without complexity: the security environment has been materially altered by the conflict beginning in October 2023, property prices in Tel Aviv and central Israel are among the world's most expensive, and the tax system — once beyond the exemption period — is moderately demanding, with top marginal rates approaching 50%.

This guide is for general information only. Israeli tax law is subject to change. Always obtain professional advice from Israeli (Licensed Tax Adviser or CPA) and UK-qualified advisers before making decisions.

Tax Residency Rules

Israel's Income Tax Ordinance establishes tax residency based on the centre of life test — an individual whose centre of life is in Israel is resident for tax purposes. Relevant factors include: location of habitual home; location of family (spouse and minor children); place of occupation or income-generating activity; location of business interests; and place of regular social and economic activity.

Day-count presumptions assist the determination: more than 183 days in Israel in a year creates a presumption of Israeli residency; 30–183 days, combined with certain other factors, may also establish residency. These presumptions are rebuttable.

Israeli residents are subject to income tax on their worldwide income (subject to the ten-year exemption below). Non-residents pay Israeli tax on Israeli-source income only.

The Ten-Year Exemption for New Immigrants and Returning Residents

Under amendments to the Income Tax Ordinance, Olim Chadashim (new immigrants making Aliyah) and Toshavim Chozrim Vatikim (returning residents who have been non-resident for at least ten consecutive years) benefit from a comprehensive exemption on:

• Foreign-source income (employment income from overseas employers, business income from non-Israeli activities)
• Foreign-source capital gains (on assets located outside Israel)
• Interest, dividends, and rental income from non-Israeli sources

The exemption lasts for ten years from the date of making Aliyah or returning. Historically, this came with a parallel exemption from the obligation to report foreign-source income and assets to the Israeli Tax Authority (ITA). That reporting exemption has, however, been abolished for individuals who become Israeli resident on or after 1 January 2026 (under a 2024 amendment to the Income Tax Ordinance): such new arrivers remain exempt from tax on qualifying foreign income for ten years but must now report their worldwide income and foreign assets to the ITA. Those who became resident before that date retain the older reporting exemption for the balance of their benefit period.

This regime is the centrepiece of Israeli financial planning for qualifying individuals. HNW immigrants who structure their Israeli residence carefully during the exemption decade — maintaining offshore investment portfolios outside Israeli tax — can accumulate very significantly without Israeli tax. Planning the disposal of foreign assets within the exemption window, and the structure of ongoing foreign income streams, is an important pre-arrival exercise.

Income Tax Rates

After the exemption period (or for non-qualifying residents), Israeli income tax rates:

• Up to ILS 84,480 (~£17,600): 10%
• ILS 84,481–ILS 120,720: 14%
• ILS 120,721–ILS 193,800: 20%
• ILS 193,801–ILS 270,000: 31%
• ILS 270,001–ILS 540,840: 35%
• ILS 540,841–ILS 698,280: 47%
• Above ILS 698,280: 50%

National Insurance (Bituach Leumi) and health insurance (Kupat Cholim) levies are imposed additionally on employment and self-employment income, at rates that taper for higher earners.

Capital Gains Tax

Israeli CGT is levied at 25% on real capital gains from the disposal of securities (shares, bonds, derivatives). For "controlling shareholders" (10%+ of company shares), the rate is 30%.

Real property capital gains are taxed at the applicable income tax rate (potentially up to 50%), with significant reliefs for sales of principal residence (Patur Milinear Yachid — principal residence exemption on one property every 18 months, subject to conditions and value caps).

Inflation adjustments apply — Israeli CGT is calculated on the "real" gain above inflation, unlike most other jurisdictions.

A high-income surtax also applies. A 3% surtax is levied on taxable income above an annually indexed threshold (around ILS 720,000), and from 2025 an additional 2% surtax applies specifically to high capital income (dividends, interest, and capital gains) above that threshold — taking the top effective rate on large capital gains to broadly 5% above the headline CGT rate.

Property Market

Israel's property market has experienced dramatic appreciation over the past two decades. Tel Aviv's prime residential market is comparable in cost to London or Paris; prices in certain central Tel Aviv neighbourhoods (Basel, Rotschild, Old North) routinely exceed USD 10,000 per square metre. Jerusalem, Ra'anana, Herzliya Pituah, and Caesarea also command premium prices.

Foreign nationals may purchase property in Israel without restriction; there is no requirement to be Jewish or an Oleh. However, the Israeli property tax system — particularly Purchase Tax (Mas Rechisha) at progressive rates (up to 10% for second properties) — represents a material upfront cost.

Annual building and improvement levies (Arnona) are low by international standards. There is no recurring annual property wealth tax.

Property transactions in Israel are complex, involving purchase tax, legal fees, and registration requirements; a qualified Israeli real estate lawyer is essential.

Key Visa and Residency Route for HNW Individuals

Aliyah (immigration under the Law of Return) is available to Jewish individuals, their spouses, and children, regardless of national origin. Aliyah is processed through the Jewish Agency for Israel or Nefesh B'Nefesh (for North American and UK applicants). The process results in permanent residency and eventual citizenship.

For non-Jewish foreign nationals, Israel does not operate a formal investment or wealth visa programme equivalent to those in Europe or Asia. A B/1 temporary work visa and then a renewable temporary residence permit (A/5) can be obtained for those with employment or business interests in Israel. Permanent residency (PR) for non-Jewish non-citizen residents is granted sparingly. Specialist Israeli immigration counsel is advisable.

Banking

Israel's major banks are Bank Hapoalim, Bank Leumi, Bank Discount, Mizrahi Tefahot Bank, and First International Bank (FIBI). Private banking is available through Leumi Private Banking and Hapoalim's wealth management arm, as well as the Israeli offices of international wealth managers.

The Israeli Shekel (ILS) is a freely floating currency with a robust institutional framework managed by the Bank of Israel. It has been broadly stable against major currencies over the medium term, though periods of geopolitical tension can generate short-term volatility.

Israeli banking documentation requirements are thorough; Anti-Money Laundering compliance is stringent. New immigrants are generally assisted through dedicated Olim banking services at most major banks.

Pension Considerations for UK Expats

UK state pension accrual should be protected by voluntary NI contributions (Class 2 or 3); there is no UK–Israel social security totalization agreement. Voluntary contributions remain important for maintaining the UK state pension record.

Israeli pension law requires employer contributions to a Pension Fund (Keren Pensia) or Provident Fund (Kupat Gemel) on behalf of employed workers. These are mandatory defined-contribution vehicles; employer contributions of approximately 6.5% and employee contributions of 6% of salary are typical. The Israeli pension system is well-regulated.

UK private pensions drawn in Israel are subject to Israeli income tax (as state of residence under the DTA). During the ten-year exemption, foreign pension income from non-Israeli sources is exempt; after the exemption, the DTA governs allocation.

UK–Israel Double Taxation Agreement

The UK–Israel DTA (1962, as updated by protocol) provides:

• Dividends: 15% withholding (5% for companies holding 15%+ of capital)
• Interest: 15% withholding
• Royalties: 15% or lower
• Government pensions: taxable in the UK
• Private pensions: taxable in Israel (state of residence)

The treaty framework allows relief from double taxation through credit mechanisms; the interplay with the Israeli ten-year exemption requires careful planning to ensure UK tax withheld at source can be efficiently credited or mitigated.

Practical Expat Community Observations

Tel Aviv's expatriate community — distinct from the Olim community, though the boundary blurs — is concentrated in the technology and startup ecosystem, financial services, and real estate sectors. The city's Bauhaus architecture, beach culture, restaurant scene, and 24/7 energy make it an appealing destination for younger, professionally active individuals.

Jerusalem attracts those with cultural, religious, or historical connections; its demographic and social character differs significantly from Tel Aviv. Ra'anana and Modi'in have large English-speaking communities and are popular with families for their school infrastructure and suburban character.

The security situation since October 2023 has significantly affected quality of life, with rocket alerts, reservist call-ups, and economic disruption. The situation continues to evolve; any individual considering Israel as a near-term base should take current security advice and assess their risk tolerance and insurance coverage (property, life, medical evacuation) accordingly.

How Global Investments Can Help

We advise internationally mobile individuals — both Jewish individuals considering Aliyah and non-Jewish nationals with Israeli business interests — on navigating the ten-year exemption, structuring offshore portfolios for maximum benefit during the exemption window, managing UK tax obligations during Israeli residence, and coordinating with Israeli CPAs and legal advisers. Contact us to discuss your situation in confidence.