Welcome to Israel – Tax Benefits for New Immigrants and Returning Citizens
Israel is renowned throughout the world for the generous benefits it offers new immigrants. However, the vast quantity and variety of these benefits can prove overwhelming and confusing once a prospective immigrant begins studying all the brochures and guides to their new lives in Israel.
Even Israelis returning to Israel after living abroad for a number of years are unable to obtain a clear picture of the benefits and subsidies to which they are entitled. This article will present the issues of immediate importance to olim and returning citizens.
Those entitled to tax benefits are:
- Oleh: A new immigrant to Israel;
- Returning Israeli Citizen: An individual who returns to Israel after having lived outside of Israel continuously for at least 10 years, thus having ceased to be an Israeli resident. Such individuals are entitled to the same benefits as an Oleh Chadash.
- Special Category: Individuals who returned to Israel during the years 2007–2009 are treated as Returning Israeli Citizens even if they lived outside of Israel continuously for at least 5 years rather than 10 years.
The main benefits for new immigrants and returning citizens are as follows:
Private and Business:
10 years exemption from paying tax on incomes drived outside of Israel including passive income, such as: dividends, interest, rent, royalties and pensions generated by assets held overseas, and capital gains from the sale of assets located abroad;
10 years exemption from declaring on foreign sources: Income entitled to tax benefits for new Israeli residents includes business incomes generated by assets held overseas and vocational and labor income, such as: salaries and income from activities of an independent nature generated abroad.
Companies established abroad and owned by an Oleh or a Returning Israeli Citizen there are also 10 years exemption from being defined as a resident Israeli company. The meaning is that their company will not be considered as an Israeli company for taxation purposes for that period of time.
An Option to be considered a foreign resident for taxation purposes for one year after arrival.
Three and a half years of tax credits, with an option for an extension.
These credits are broken down as follows:
First 18 months after immigrating to Israel (making aliyah): three additional tax credit points, amounting to a tax reduction of 645₪ per month or 11,610 ₪ for those first 18 months.
For the following 12 months: two additional tax credit points, amounting to a tax reduction of 430₪ per month or 5,160₪ for the year.
Another 12 months: one additional credit point, amounting to a tax reduction of 215₪ per month or 2,580₪ for the year.
In Addition: additional reductions are available for parents of young children, working mothers, discharged soldiers and others under specified circumstances.
Other benefits provided to new Israeli citizens by the Israeli government:
Absorption Basket (Sal Klita): Financial assistance provided by the Israel Ministry of Immigrant Absorption (Misrad Haklita).
Rental Assistance: The Ministry of Housing (Misrad Hashikun) offers new immigrants (olim chadashim) rental assistance starting from the eight month after making aliyah to Israel.
Health Coverage: The National Insurance Institute (Bituach Leumi) provides free basic coverage in any health fund (Kupat Cholim) of an individual’s choice for the first year after making Aliyah.
Municipal Property Tax (Arnona) Discount: all cities and towns in Israel charge municipal property taxes (arnona) to renters and property owners. Olim are customarily granted a discount of 70–90% on arnona payments for up to 100 Sq. meters of a property.
Hebrew Ulpan: Free Hebrew language Ulpan courses, available in many locations throughout Israel. A standard subsidized Ulpan course meets five days a week, five hours each day and lasts for five months.
Subsidized University Tuition: Olim and other qualified candidates up to the age of 23 can receive assistance for a one year university preparatory course (mechina).
Customs Benefits: Olim are allowed to bring appliances and household goods from any country tax free.
Mortgage Discount: Olim are entitled to interest rates lower than the market rate for up to approximately 150,000₪.
Free Flight to Israel: New Olim arriving from North American are eligible for a free flight to Israel on an El Al flight from any El Al North American hub when making Aliyah;
Free Transportation from Ben Gurion Airport: Olim receive a free taxi from Ben Gurion Airport to their first destination after making aliyah;
Customs Benefit for a Car Purchased or Imported: Olim pay a reduced tax rate on the purchase of a new car in Israel or on the import of a car from abroad;
Maximum Sum of Money Olim can Bring to Israel: The maximum amount of cash that an Oleh can bring into Israel is 1,250,000₪ (the total sum in the reporting person’s possession). Sums of 50,000₪ and above need to be reported.
Immigration and repatriation involve a thorough preparatory process and our team of experts will be pleased to help with your first steps in Israel.
With kind regards,
Allwira & Angel Team, at your service.