Here is a comprehensive news report on the November 2025 tax reform announcement.

Source: Ministry of Finance / Ministry of Aliyah & Integration

In a dramatic move to attract human capital and boost the economy, Finance Minister Bezalel Smotrich and Aliyah Minister Ofir Sofer have unveiled a game-changing tax reform tied to the 2026 State Budget.1 This proposal effectively turns Israel into a tax haven for new immigrants (Olim) and returning residents for their first two years.

Here is the “Mega Report” with the fine print, the hidden caveats, and the strategic trade-offs you need to know.

1. The Headline Benefit: 0% Tax on Israeli Income

For the first time, Israel is offering a tax exemption on income earned inside Israel.

  • Current Reality: Olim get a 10-year exemption on foreign income (passive & active), but pay standard high taxes on Israeli salaries immediately.

  • New Reality: Qualifying immigrants will pay 0% income tax on their Israeli salaries for their first two years.3

2. The “Hidden” Schedule (It’s Not Just 10/20/30%)

While the headlines state a flat 1 million NIS cap, the official Ministry data reveals a tapering cap. The benefit shrinks in two ways over 5 years: the tax rate rises and the income ceiling drops.

Year of Aliyah Tax Rate on Israeli Income Income Cap (Annual) What You Pay Above Cap
2026 (Year 1) 0% ₪1,000,000 Standard Marginal Tax
2027 (Year 2) 0% ₪1,000,000 Standard Marginal Tax
2028 (Year 3) 10% ₪600,000 Standard Marginal Tax
2029 (Year 4) 20% ₪350,000 Standard Marginal Tax
2030 (Year 5) 30% ₪150,000 Standard Marginal Tax

Key Takeaway: The “1 Million Shekel” benefit is massive for the first 24 months.4 By year 5, the benefit is minimal (capped at 150k income), serving as a “soft landing” rather than a permanent shelter.5

3. Eligibility: Who Qualifies?

To trigger this specific benefit, you must meet two conditions:

  1. Status: You must be a New Oleh OR a “Veteran Returning Resident” (Toshav Chozer Vatik) — meaning you have lived outside Israel for at least 10 consecutive years.6

  2. Timing: You must become a resident during the eligibility window.

    • Official Ministry Statement: Applies to those arriving from Nov 5, 2025 through the end of 2026.7

    • Caveat: This is a proposal awaiting final legislation. The exact “cutoff date” is the most sensitive detail right now.

4. The “Big Catch”: The Privacy Trade-Off

This is the most critical part of the analysis that most standard news reports miss. There is a conflict between the Tax Benefit and the Reporting Requirement.

  • The “Old” Regime (Ends Dec 31, 2025):

    • Benefit: 10-year tax exemption on foreign income.8

    • Privacy: 10-year exemption from REPORTING foreign income.9 You don’t even have to tell the Israeli Tax Authority (ITA) about your assets abroad.

  • The “New” Regime (Starts Jan 1, 2026):

    • Benefit: 10-year tax exemption on foreign income PLUS the new 0% tax on Israeli income.10

    • Privacy: ZERO privacy. The reporting exemption is repealed.11 You must report everything to the ITA from Day 1, even if it is tax-exempt.12

The Dilemma:

If you move in December 2025, you likely secure the “Privacy/Non-Reporting” benefit for 10 years, but you might lose the 0% Israeli tax deal (depending on the final text of the law).

If you move in January 2026, you get the 0% Israeli tax deal, but you must report all your global assets to the ITA immediately.13

5. Why This Matters Now

  • Strategic Shift: Israel is pivoting from “social immigration” to “economic immigration.” They are actively competing with tax jurisdictions like Portugal, Italy, and the UK (which recently abolished its “non-dom” regime) to attract high-earning professionals.

  • Legislative Hurdles: This is currently a government decision approved for the budget. It must pass three readings in the Knesset to become law. Given the coalition’s stability, it is likely to pass, but details (specifically the start dates) could be amended in committee.

6. Official Documents

For verification, you can refer to the official Ministry of Aliyah & Integration Announcement which details the sliding scale caps.

Next Step for You

If you are advising clients or planning this for yourself, do not make a move date decision yet. The friction between “moving in 2025 for privacy” vs “moving in 2026 for tax breaks” is the single biggest financial decision for Olim right now.

Would you like me to create a “Decision Matrix” comparing the Net Present Value (NPV) of the 0% tax benefit vs. the risk/cost of reporting global assets?

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