The Israeli budget, published on March 30, 2026, included among many other matters, attractive new income tax exemptions for income produced or accrued in Israel by a New Resident or Veteran Returning Resident, applicable as of January 1, 2026. These benefits were accepted as part of the 2026 budget approved by the Knesset at the end of March.
These exemptions apply from the day that a person first became an Israeli Resident, or since a Veteran Returning Resident returned to Israel and became a tax resident, provided that the date of start of Israeli tax residence is between November 25, 2025 and December 31, 2026.
Under the new law, New and Veteran Returning Residents can also enjoy, in addition to the existing 10-year tax exemption from all foreign income, an income tax exemption from income accrued or generated in Israel, for a period of 5 years, according to the following table:
Tax Year Exempted Amount
2026 Up to ILS 600,000
2027 Up to ILS 1,000,000
2028 Up to ILS 1,000,000
2029 Up to ILS 350,000
2030 Up to ILS 150,000
In general, Qualifying Income is taxable income (not attributed via a transparent entity such as a partnership) that is income from personal exertion (earned income for work or services).
Calculation of exemption in 2026 also based on period of residency – the New Immigrant or Veteran Returning Resident is entitled in the Tax Year 2026 to the exempt income ceiling of 600,000 NIS but only proportionally to their period of residency in Israel in the said year.
Note that the benefits will not apply to an individual who ceased to be an Israeli Resident during one of the Tax Years 2028 or 2029 and stayed in Israel for less than 75 days in one of said years.
These benefits come in addition to the those already in place for new (Olim Chadadhim) and returning residents, including the ten-year tax (but not reporting) exemption for foreign income (excluding income from work or services).
A foreign resident body of persons, such as a corporation, can receive a tax exemption in Israel for business income generated in Israel during tax years 2026 to 2030, if such income arises solely from the personal efforts of a New or Veteran Returning Resident. The exemption applies only where the entity would not have had any Israeli-source business income without said individual’s personal exertion, unless the entity elects not to use the exemption.
The exemption does not apply in two cases. First, it is unavailable if the New or Veteran Returning Resident whose efforts generated the income is also a Substantial Shareholder (holds 10% or more) in the foreign entity. Second, if the foreign resident body is a transparent entity, the exemption does not apply to the portion of income allocated to a holder of rights in the entity who is an Israeli resident.
Individuals considering a move to Israel should take the substantial new tax benefits into consideration in terms of timing the move.
The content in this update is provided for informational purposes only and is not intended to be comprehensive. It does not serve to replace professional legal advice required on a case by case basis.
Key Contacts
Tal Atsmon
Yaron Sever
