Tax breaks to new immigrants and returning residents
Dr. Avi Nov, Adv. 

April 2010
Updated: February 2011
 
The extraordinary tax breaks to new immigrants and returning residents target people that the government wants to encourage, such as Israeli high-tech entrepreneurs who emigrated, and the owners of foreign assets and companies.

The tax breaks include a ten-year exemption on income taxes and the filing of returns on income from foreign assets. The exemption applies to all sources of foreign income, including dividends, capital gains, interest payments, rental income, business revenue, and professional fees.

Amendment 168 to the Income Tax Code, passed in September 2008, awards various tax breaks to new immigrants and returning residents, particularly those with foreign assets and income as they will be wholly exempt from Israeli taxes for 5-10 years. Not to mention the exemption on filing tax returns on this income.

The legislation effectively turned Israel into one of the world's best tax shelters.

The amendment distinguishes between a "senior returning resident", an Israeli citizen who has resided abroad for at least ten years, and a "regular returning resident", an Israeli citizen who has resided continuously abroad for at least six years; a "senior returning resident" is effectively considered as a new immigrant.

A "senior returning resident" gets a ten-year tax exemption, while a "regular returning resident" gets a five-year exemption. There is a loophole: the amendment stipulates that an Israeli citizen who has resided abroad for five years at the end of 2009 will be considered a "veteran returning resident".

Foreign companies owned by new immigrants will not be considered as a company owned and managed from Israel during the exemption period and will not be considered as an "Israeli resident" for tax purposes. Furthermore, in order to determine a "foreign professional company" and a foreign controlled company, the share of the new immigrant or returning resident in that company will not be considered during the exemption period.

In addition, the Economic Arrangement Law (5769-2009) resulted in a new ordinance, which provides for an income tax exemption and filing for an addition ten years (20 years altogether) provided that the beneficiary will make substantial investment in Israel within two years of arrival in the country.

The legislature is constantly seeking ways to ease the tax burden. In this instance, the easing is for wealthy new immigrants and returning residents who get substantial foreign income. 
 
 

Dr. Avi Nov Law Offices, Israeli & international tax law 

If you wish to make an appointment to discuss your tax issues with Dr. Avi Nov, you are welcomed to send him an Email mail,envelop,message,email,letter 


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