Comment: Israel's controversial tax incentive proposal for immigrants - and the reactions
Open for public comment until December 17th, 2025, the proposed measure aims to attract high-earning immigrants and returning residents with benefits in effect through 2030.
Israel is proposing controversial new tax incentives to attract high-earning new immigrants and returning residents. Here’s what’s inside, and the community’s reactions. The proposal is currently open for public comment.
The central mechanism of the incentive is a temporary, five-year exemption on a portion of income earned from work in Israel, with the maximum exemption amount decreasing annually from one million NIS in 2026-2027 to 150,000 NIS by 2030. The new tax break supplements existing benefits and specifically aims to motivate recipients to move their active professional and business operations to Israel.
The primary stated objective of this proposed legislation is to encourage the immigration of individuals from higher socioeconomic brackets to Israel. The proposal mentions increased global anti-semitism, and acknowledges that such immigrants would boost the Israeli economy.
This measure is set as a temporary provision applying only to those who become residents in 2026.
What’s new in this proposal:
In addition to existing benefits that exempt foreign-sourced income, this proposal exempts income earned within Israel from work or active business for five years through 2030.
The exemption caps decline annually:
₪1M in 2026-2027;
₪600K in 2028;
₪350K in 2029;
₪150K in 2030, before reverting to standard taxation in 2031.
Proportionality provision:
While the annual cap for 2026 is indeed 1 million NIS, the source specifies that for the 2026 tax year specifically, the exemption ceiling is proportional to the amount of time the person was actually a resident in Israel during that year.
The benefit stacks with existing 10-year foreign income exemptions and tax credit points, meaning eligible immigrants can combine both incentives. Income above the caps is taxed at standard rates.
What does the immigrant tax proposal mean?
In Israel, there are several non-profit organizations that promote the economic integration of immigrants and track their outcomes. We spoke with Abbey Onn, CEO of Nevo Network, one such organization that yesterday received a national award from President Herzog for extraordinary contributions to immigrants.
Onn told us,
“It’s great to see confirmation that immigrants boost the Israeli economy. By spreading benefits over a five-year period, this may be a positive sign from of the government that retaining Olim is just as important as attracting them. This is a good start, but I would like to see more done.”
Eligibility for new tax benefits:
Eligibility requires becoming an Israeli tax resident for the first time (or returning) during the 2026 tax year, with either Oleh status or a Veteran Returning Resident certificate from the Ministry of Aliyah and Integration.
The exemption applies only to “income from personal labor,” excluding passive income or payments from relatives unless sourced from a company fully owned by the immigrant.
The Treasury projects gradual revenue loss starting at ₪40M in 2026 and peaking at ₪160M in 2030, betting that economic growth from new high-earners will offset the tax forgone.
More reactions to the proposal so far:
Comments published on the proposal include concerns about fairness to existing citizens who have made certain sacrifices:
“Such legislation benefits those who did not serve in the army, did not contribute anything to the State of Israel while abroad, and will now receive benefits and health services at the expense of Israeli citizens who pay taxes all their lives, volunteer for the army, and fight for the state.”
Another comment highlights the perceived inequality:
“A reform that rewards those who left and ignores those who stayed creates structural and inappropriate discrimination.”
A third point is made about the need to get more specific in the definitions of professions who benefit in the tax breaks:
“The proposed exemption is a sweeping exemption. There is no distinction between types of immigrants, fields of occupation, or potential economic contribution. A wise policy should have focused the benefits on immigrants with required professions, entrepreneurs, investors, or those who bring real human or financial capital that will contribute to the Israeli economy.”
Public comment open:
The proposal is open for public comment until December 17th, 2025 via signing in to the Ministry of Justice website, and unfortunately, the interface is only in Hebrew, like many official platforms in Israel.
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