Ido Shacham - Real Estate Tax Solutions

New immigrants to Israel and returning Israeli citizens are entitled to benefits from the Israeli Income Tax Ordinance. A returning citizen is defined as someone who has resided overseas for at least 10 years, resided overseas for 5 years and returned to Israel between 2007-2009, or were considered to be foreign residents on 1 January 2007.

Special benefits are included for entrepreneurs. The following benefits are offered to those who immigrated to Israel after 1 January 2007:

New Tax Status for Returning Citizens

A returning resident is classified as a new immigrant for tax purposes, which expands tax benefits for returning residents.

Tax Exemptions for Companies Managed by Returning Residents or New Immigrants

Returning residents or new immigrants who own and manage a foreign company active abroad, or own its shares, will no longer be automatically subject to Israeli taxes. The company can therefore continue generating tax-free revenue, so long as the revenue is not generated in Israel.

Exemption from Reporting Earnings Abroad

Returning residents or new immigrants, and the foreign companies under their direction, are not obligated to report earnings from exempted foreign income. Only income from activities in Israel and from Israeli investments and assets generated after immigrating or returning to the country are subject to reporting and taxation, according to tax laws.

Expansion of Tax Benefits

Returning residents and new immigrants are exempt from taxes for ten years on income generated outside of Israel. This covers all active and passive income, like interest, dividends, pensions, royalties, and asset rentals. All income, both realization of assets and investments abroad and from regular income abroad, is exempt.

Tax Benefits on Interest from Foreign Currency Deposits

New immigrants are entitled to an exemption from paying tax on interest earned in foreign currency deposits for many years, so long as the source of the deposits is capital possessed prior to immigration, and was deposited in an Israeli banking institution.

An Adjustment Year

New immigrants and returning residents can fill out an application form for an adjustment year, which will ensure they are considered non-Israeli citizens (for tax purposes) for the adjustment year. At the end of the year, they will then benefit from the tax reform and their period of residency will start retroactively from the date of arrival to Israel.