Israel Tax Authority — New disclosure and reporting rules for Olim and returning residents effective January 1, 2026

Source: https://aaci.org.il/new-disclosure-rules-for-olim-and-returning-israelis-effective-1-1-2026 · 2026

Background

Israel has long offered tax incentives to new immigrants (Olim) and veteran Israeli returning residents. Historically:

Such individuals could benefit from a 10-year exemption from Israeli tax on income sourced abroad (foreign-sourced income) from the date they become a tax-resident.
In many cases, they were also exempt from the obligation to file (or report) that foreign-sourced income and foreign assets during that benefit period.
Foreign companies linked to such persons could, in some cases, avoid Israeli reporting if the income remained abroad.

What Changed: Key New Rules

1. Repeal of the Reporting Exemption

A major amendment to the Income Tax Ordinance (New Version) (ITO) was passed on 2 April 2024, which abolished the reporting exemption for new immigrants and veteran returning residents who become Israeli residents on or after 1 January 2026.
Even if they still benefit from the 10-year tax exemption on foreign-sourced income, they will NOT be exempt from reporting that income or foreign assets to the Israel Tax Authority (ITA).
The reporting obligation covers worldwide income and foreign assets/trusts.
Trusts with settlors/beneficiaries who are new immigrants will be subject to reporting.
The ITA is empowered to request information from foreign companies managed in Israel by those individuals.

2. Timing / Transitional Rules

Key date: 1 January 2026.
- Individuals who become Israeli tax-residents on or after this date face the new reporting obligations.
- Those who became residents before this date retain the older exemption from reporting (for the 10-year benefit period) under the previous rules.
Some advisors recommend establishing strong ties to Israel before 31 December 2025 to qualify under the older rules.

The 10-year tax exemption on foreign-sourced income remains available for new immigrants and returning residents.
New proposals from the Ministry of Finance suggest that 2026–2027 new arrivals may receive zero income tax on Israeli-source income initially, with escalations in following years. This has not been finalized as of the time of writing.

Practical Implications for Olim and Returning Residents

Increased Disclosure Burden (for those arriving on/after 1 Jan 2026)

You will be required to report worldwide income and foreign assets/trusts to the ITA, even if those assets/income are exempt from taxation under the 10-year regime.
You may need to maintain records of foreign companies/trusts you control or in which you are a beneficiary, and report beneficial-owner details.
If you have complex foreign entities, trusts, or cross-border structures, review them carefully with a tax advisor before making Aliyah or returning.

Opportunity for Those Landing Earlier (before 1 Jan 2026)

Becoming a resident prior to the 1 Jan 2026 cutoff may allow you to benefit from the older regime (reporting exemption for the 10-year period).
However, you may not benefit from the potential zero income tax for 2 years on Israeli-source income if that law passes.

Tax Exemption Remains — Only Reporting Exemption Is Removed

Important: The tax exemption on foreign-sourced income/gains remains in place for eligible individuals. It is the reporting exemption that has been removed.
You will still not pay tax on certain foreign income and gains, but you will have to report it.

Determining Israeli Resident Status

Reporting obligations are triggered when you become an Israeli tax-resident.
Residency is determined by tests such as “center of life” and day-count rules.
Speak with your tax/legal advisors about the precise date you will become a resident and when your 10-year benefit period begins.

Review of Foreign Structures

If you have foreign trusts, companies, or assets: check how they will be treated under the new rules — you may now have to report them even if they remain exempt from tax.
Keep up-to-date records including beneficial-ownership information.

Plan Timing Carefully

The date you land or establish residency matters.
If arrival is after 1 Jan 2026, the new rules apply.
Consider pros and cons of arriving earlier vs. later in terms of both tax and disclosure obligations.
Also consider non-tax factors such as absorption benefits, employment, and integration.

Contact for Questions

Lisa Alter: 02-568-4637 | lisa@ardcpa.com

Tax and Legal Disclaimer: The materials provided are for educational/discussion purposes only and should not be relied upon as legal, accounting, or tax advice for the U.S. or Israel. Please contact your U.S. and/or Israeli tax attorney or accountant for specific advice.