Israel taxes none of your foreign pension income for your first 10 tax years as a new resident. U.S. Social Security, 401(k) and IRA withdrawals, CPP, OAS, and UK pensions are all fully exempt, with no ceiling. U.S. Social Security stays tax free in both countries even after year 10, under Article 21 of the US-Israel treaty. Canada withholds 15% at source under its treaty instead of the default 25%. The UK pays its State Pension gross and uprated in Israel: £241.30 a week from April 2026. After year 10, Israel either exempts 35% of the pension or caps your tax at what you would have paid at home; our estimate is that a $3,000-a-month US pension owes about ₪490 a year in Israeli tax in year 11. Two catches: residents arriving from 1 January 2026 must report worldwide income from year one, and foreign government pensions are taxed only by the country that pays them.
You spent decades building a pension in dollars, pounds, or Canadian dollars, and the move to Israel puts two tax authorities, a treaty, and Bituach Leumi between you and that money. The rules are genuinely favorable, but only if you file the paperwork in the right order and know which pension follows which rule: private pensions follow you to Israel, government pensions stay taxed at home, and one pension (U.S. Social Security) escapes tax everywhere. This page covers each with 2026 figures. It sits inside our guide to pensions, taxes, and financial planning for retirees in Israel, part of the complete guide to retiring in Israel.
Five terms, one line each:
- Oleh chadash: a new immigrant to Israel under the Law of Return.
- Veteran returning resident: an Israeli who lived abroad 10 or more consecutive years; gets the same 10-year exemption as a new oleh.
- Withholding tax: tax the paying country deducts before the pension reaches your bank.
- Totalization agreement: a treaty that stops two countries charging social security tax on the same paycheck. The US and Israel do not have one.
- Sections 9(b) and 9(c): the two Israeli relief rules for foreign pensions once the 10-year exemption ends.
Who taxes what: the one-table version
| Pension | Years 1 to 10 in Israel | Tax at source | After year 10 |
|---|---|---|---|
| U.S. Social Security | Tax free | None (treaty Article 21) | Still tax free in both countries |
| US 401(k), IRA, private pensions | Tax free in Israel | The US still taxes its citizens (savings clause); Roth stays tax free | Israel taxes, with the 35% exemption or the 9(c) cap; Roth stays tax free in both |
| CPP and OAS | Tax free in Israel | Canada withholds 15% under the treaty | Israel taxes; the 15% is credited against the Israeli bill |
| UK State Pension and private pensions | Tax free in both countries | None (paid gross under an NT code) | Israel only, with the 35% exemption or the 9(c) cap |
| Government service pensions (US, UK, Canada) | Taxed only by the paying country | Source country | Source country, unchanged |
Your 10 tax-free years, and the 2026 reporting change
New olim and veteran returning residents pay zero Israeli tax on all foreign-source income for 10 full tax years from the date of tax residency: foreign pension income, IRA and 401(k) distributions, dividends, interest, foreign rent, and capital gains on foreign assets, with no cap. Bituach Leumi contributions are not owed on foreign-source income either, during the exemption or after it; only work income triggers them. The clock cannot be paused or extended, and Israeli-source income (including remote work physically done from Israel) is taxable from day one. The full mechanics are in our guide to the 10-year oleh tax exemption and cross-border tax.
What changed in 2026: anyone who becomes an Israeli tax resident on or after 1 January 2026 must report worldwide income and foreign assets (bank accounts, portfolios, real estate, pension accounts, trusts) to the Israel Tax Authority from year one, even though no tax is owed on the exempt income. Pre-2026 arrivals keep both the tax exemption and the old reporting waiver for their full window. The exemption itself did not change.
Year 11 and beyond: the 35% haircut or the home-country cap
Once the exemption ends, foreign pensions become taxable in Israel, and you choose whichever of two permanent relief rules costs you less:
| Section 9(b): 35% exemption | Section 9(c): home-country cap | |
|---|---|---|
| What it does | Exempts a flat 35% of the gross foreign pension, no upper ceiling | Caps your Israeli tax at what you would have paid had you stayed in the source country |
| Best for | Larger pensions | Moderate pensions from low-tax countries |
| How it happens | Claimed on the annual return | Not automatic; requires a calculated hypothetical home-country tax bill |
A third rule piggybacks on the source country: if the pension is legally not taxable at home (a Roth IRA is the classic case), Israel does not tax it either. Our estimate of a typical year-11 bill, computed at the ₪3.00 per dollar working rate: a $3,000-a-month US pension is ₪108,000 a year; the 35% exemption leaves ₪70,200 taxable, all inside the 10% bracket, for ₪7,020 of gross tax; a single resident’s 2.25 credit points (₪2,904 each per year) remove ₪6,534, leaving about ₪490 a year, an effective rate under half of one percent. The returns and forms this takes in practice are covered in our guide to pension tax and retirement tax forms in Israel.
U.S. Social Security in Israel: the pension neither country taxes
Article 21 of the US-Israel tax treaty exempts U.S. Social Security in Israel from tax in both the United States and Israel, at any amount, forever. This provision survives the treaty’s savings clause, which is what makes it rare: it is one of the few treaty benefits a US citizen can use against their own US tax bill. WEP and GPO were repealed effective 1 January 2024 (Social Security Fairness Act, signed 5 January 2025), so an Israeli pension no longer reduces your US benefit, and back payments were made.
The US and Israel have no totalization agreement, which historically meant a self-employed US citizen in Israel paid US self-employment tax (15.3% on 92.35% of net earnings, up to the $184,500 wage base in 2026) plus Israeli Bituach Leumi on the same income. The Knesset fixed this on 25 February 2026 with Amendment 262 to the National Insurance Law: US olim who pay US Social Security taxes on their work income are exempt from Bituach Leumi contributions on that income for their first five years of residency, retroactive to 1 January 2026 for recent arrivals, with benefits credited as if contributions had been paid.
Logistics: benefits deposit directly to an Israeli IBAN via SSA Form 1199, filed at the US Embassy in Jerusalem (14 David Flosser Street; Social Security hours Mondays and Thursdays, 8:30 to 11:30 am) or online through My Social Security. Medicare does not cover care in Israel; you enroll in a kupat cholim here and keep paying Part B only if you want Medicare on US visits. Whether to keep the US brokerage and bank accounts behind the pension is its own decision, covered in our guide to keeping U.S., UK, and international accounts as an Israeli resident.
Canadian pensions in Israel: claim the 15% rate, budget for the GIS cut
Canada withholds tax at source on CPP and OAS paid to Israeli residents. The default non-resident rate is 25%; under Article 17 of the Canada-Israel treaty (in force since 1 January 2017), periodic pension payments are capped at 15% of the gross payment. File Form NR5 with the CRA to have your actual, usually lower, Canadian liability withheld instead. During your 10 exempt years Israel taxes nothing; after year 10 Israel taxes Canadian pensions in Israel as residence-country income, and the Canadian withholding is credited shekel for shekel against the Israeli bill.
Our estimate of what the treaty rate is worth: maximum CPP (CAD $1,507.65 a month, January 2026) plus maximum OAS at ages 65 to 74 (CAD $743.05, Q2 2026) is CAD $27,008 a year. Default withholding takes CAD $6,752; the treaty rate takes CAD $4,051. Filing the paperwork is worth about CAD $2,700 a year.
The trap is GIS. The Guaranteed Income Supplement (maximum CAD $1,109.85 a month for a single person) stops once you are outside Canada more than 6 months, whatever your income, and the Allowance benefits stop with it. A low-income Canadian who relies on GIS loses CAD $13,318 a year by moving, and no Israeli benefit automatically replaces it. Price that into the budget before booking the flight. OAS itself keeps paying abroad and rises with Canadian inflation, including a 1.2% increase in July 2026.
UK pensions in Israel: uprated every April, with a treaty gap in your favor
Israel is on the UK’s uprating list, so UK pensions in Israel grow exactly as they would in Manchester. The full new State Pension is £241.30 a week from April 2026 (about £12,547 a year), after a 4.8% triple lock rise; the basic State Pension is £184.90. Retirees in Canada, Australia, New Zealand, South Africa, and the US have their UK pension frozen at emigration; Israel does not. Our estimate of what that is worth: the April 2026 uprating alone (£230.25 to £241.30 a week) adds £575 a year, and Israel-based pensioners collect a rise like it every April while frozen-country pensioners never do.
The UK-Israel treaty (1962, modernized by the 2019 protocol) gives the residence country exclusive taxing rights over private pensions, so a UK pension paid to an Israeli resident is taxed by Israel, not HMRC. The treaty has no subject-to-tax clause, which produces a legal gap in your favor: during your 10 exempt years, the UK does not tax the pension (treaty) and Israel does not tax it (exemption). Nobody taxes it. To get UK pensions paid gross, file HMRC’s DT-Individual claim (form R43) for an NT tax code; the DWP pays the State Pension in pounds to an Israeli account, with conversion charges. QROPS transfers of UK pension pots to Israel carry Overseas Transfer Charge exposure and need a cross-border pension specialist before you sign anything.
Foreign government pensions stay taxed at home
Nearly all of Israel’s roughly 60 tax treaties follow the OECD model: private pensions are taxed where you live, but foreign government pensions (paid for prior service to a foreign state: civil servants, military and veterans, public school teachers, police, provincial employees) are taxed only by the country that pays them. In practice:
- United States: federal civilian, military, and VA pensions paid to a US citizen in Israel are taxed only by the US (treaty Article 22).
- United Kingdom: civil service, military, NHS, and teachers’ pensions are taxed only by HMRC for UK nationals living in Israel; only an Israeli national who is not a UK national pays Israel instead.
- Canada: government service pensions are taxed only in Canada (treaty Article 18). Germany, France, and the Netherlands follow the same rule.
- No treaty: Israel taxes the pension after your 10-year window, with a credit for foreign tax withheld plus the 35% or 9(c) relief.
Government pension income triggers no Bituach Leumi contributions in Israel; only employment and self-employment income does.
Work restrictions on foreign pensions: mostly a myth, with four real income tests
There are no blanket work restrictions on foreign pensions in Israel. A retiree drawing a 401(k), a UK annuity, or CPP can take a salaried job or open a business here without forfeiting a shekel of those payments. What actually exists is four separate income tests, each run by a different agency:
| Test | Counts your foreign pension? | What work income does |
|---|---|---|
| Bituach Leumi old-age pension income test (retirement age to 70) | No. Foreign and occupational pensions are excluded by rule | Gross work pay above ₪10,113 a month (single) or ₪13,484 (couple) cuts the Israeli pension by 60% of the excess; each full year deferred adds a permanent 5%; at 70 the test disappears |
| Special old-age benefit for late-arriving olim | Yes. All worldwide income counts, even after 70 | Substantial foreign pension income above the same ceilings ends eligibility entirely |
| US Social Security earnings test (before full retirement age, 67) | No. Only earned income counts | Earnings anywhere, including Israel, above the exempt amount (US$22,320 in 2025) temporarily reduce benefits; from age 67 the test is gone |
| Canadian OAS clawback | Yes. Based on worldwide net income | 15 cents of OAS recovered per dollar above CAD $90,997 (2026); CPP has no earnings test at all |
The UK State Pension has no earnings test anywhere. And working in Israel has an upside: any salaried job here triggers mandatory pension contributions (6% employee, 14.83% employer) that build a second, Israeli, retirement income; how those funds work is in our guide to Israeli pension funds, contributions, and payouts.
Confirm these five things before the first payment lands
- Your residency start date. Tax residency from 1 January 2026 onward means worldwide reporting from year one; earlier means the old waiver still applies to you.
- Treaty paperwork filed: SSA Form 1199 for Social Security direct deposit, CRA Form NR5 for Canadian withholding, HMRC DT-Individual (R43) for gross UK payment.
- The withholding rate on your first statement. Canada at 15% (not 25%), the UK at zero under an NT code.
- Which of your pensions is a government service pension. Those stay taxed at home and belong on the home-country return, not the Israeli one.
- Your year-10 end date, in the calendar now. The 9(b) versus 9(c) choice should be made with an Israeli accountant before the year-11 return, alongside the payout decisions in our guide to managing Israeli pension accounts.
Quick answers
Is U.S. Social Security taxable in Israel?
No. Article 21 of the US-Israel tax treaty exempts it in both countries, at any amount, and the exemption never expires, before or after your 10-year window.
Can I work in Israel while collecting a foreign pension?
Yes. No Israeli law restricts it. Work income only affects the Bituach Leumi old-age pension between retirement age and 70, and foreign pension income is excluded from that test.
Do I have to report a pension that is tax exempt?
If you became an Israeli tax resident on or after 1 January 2026, yes, from year one, even though no tax is owed. Earlier arrivals keep the reporting waiver for their full 10 years.
Does my UK State Pension freeze when I move to Israel?
No. Israel is an uprating country, so the pension rises every April with the triple lock: £241.30 a week from April 2026.
Who taxes my military or civil service pension?
The country that pays it, under almost every treaty Israel has signed. It stays off your Israeli tax bill even after year 10.
Where these numbers come from
- Bituach Leumi: old-age pension rates and income test
- US-Israel income tax treaty documents (IRS)
- Social Security Administration: payments outside the US
- CRA Form NR5: reduced non-resident withholding
- GOV.UK: State Pension if you retire abroad
- AACI: the 2026 disclosure rules for olim
One next step
Once the pension side is set, the biggest lever left is housing: a paid-for apartment turns a modest foreign pension into a comfortable Israeli retirement, and the full strategy is in our guide to property and wealth planning for retirees in Israel. If you are ready to look at homes, tell us your budget, cities, and timeline, and we will send you a shortlist that fits a pension-funded budget.
