Israel’s Pesach present for new olim

Why this year is different from all other years to make aliya 

In the early hours of 30 March, just before Pesach, the Knesset passed the 2026 Budget, narrowly averting a government collapse and early elections. While public attention has focused on defence spending and politically sensitive allocations to coalition partners, buried within the fine print is one of the most significant changes to Israel’s tax regime for new immigrants in decades. 

A new tax break – and it’s a big one 

Israel has introduced a temporary exemption from Israeli income tax on Israeli-source earned income for new olim and veteran returning residents who become Israeli tax residents between 5 November 2025 and 31 December 2026. 

This is a meaningful addition to the existing aliya tax package, which already exempts foreign-source passive income and capital gains for 10 years. 

The new exemption applies to income you earn while working from Israel, and it is substantial, though time-limited: 

• 2026: up to NIS 600 000 (R3.2 million) – pro-rated depending on tax residency date during the year. 

• 2027–2028: up to NIS 1 000 000 (R5.36 million) per year. 

• 2029: up to NIS 350 000 (R1.87 million). 

• 2030: up to NIS 150 000 (R804 000). 

Above these thresholds, normal Israeli tax rates apply. 

A meaningful shift: rewarding people who work 

Historically, Israel’s income tax benefits for olim have disproportionately favoured passive offshore wealth: foreign investment income, foreign pensions, and foreign capital gains. 

This new incentive does something different. It rewards people who actively earn: employees, consultants, professionals, business owners, and entrepreneurs. 

One of the most important, and often misunderstood, points is this: for Israeli tax purposes, income is sourced based on where the work is performed, not where the employer is situated. This means a South African who makes aliya but continues to work remotely for a South African company, even their own South African business, is probably earning Israeli-source income. With the correct structuring, that income may qualify for this exemption. 

Take David, a Johannesburg-based financial professional earning the equivalent of NIS 500 000 (R2.68 million) per year. He moves to Israel in early 2026. He keeps his South African job and works remotely from Tel Aviv. He becomes an Israeli tax resident and formally ceases to be a South African tax resident with the South African Revenue Service in 2026. Potentially all of his salary could fall within the exemption thresholds in the early years. Meaning little to no tax on that employment income either in South Africa or Israel. That’s a very material benefit, particularly for high earners. 

Think you’ve missed the window? Maybe not. 

A common misconception is that eligibility depends on the date of aliya. In fact, what matters is when you become an Israeli tax resident, determined by factors like physical presence and your “centre of life”. In practice, some people who arrived before 5 November 2025 may still qualify, depending on their specific circumstances. 

Anti-avoidance rules: important but manageable 

The final legislation includes several safeguards to prevent abuse: 

• Income earned from relatives or relative-controlled companies is subject to a significantly reduced exemption (NIS 140 000, or R750 000, per year); 

• Passive income does not qualify; and 

• From 2028, at least 75 days per year must be spent in Israel. 

New residents are also required to file full Israeli tax returns and disclose worldwide income and assets, even where such passive foreign income remains exempt under the existing 10-year regime. 

These rules are not unreasonable, but they do mean that proper structuring and advice are essential. 

Next year in Jerusalem? 

At every seder, we close with the same ancient declaration: L’shana haba’ah b’Yerushalayim – Next year in Jerusalem. For most of our history, those words carried longing more than expectation. But this year could be different. 

Israel has opened a time-limited window that rewards those who come, work, and build. The financial barriers that once made aliya feel daunting for professionals and entrepreneurs have been meaningfully reduced. The window closes on 31 December 2026. 

• Michael Kransdorff is chief executive of the Institute for International Tax and Finance.