The short answer
If you are a US citizen or green-card holder, your default is a US brokerage that still services Israeli-resident clients, plus a separate Israeli account only for shekel cash and Israeli securities you actually want to hold. If you are not a US person, an Israeli brokerage is usually the simpler choice from day one. The cause is not platform quality, it is your passport: the IRS treats every non-US pooled fund as a Passive Foreign Investment Company (PFIC), with a punitive default tax regime under IRC §1291 that does not apply to non-US olim7.
Cross-border disclaimer
What an Israeli brokerage actually is
Brokerage activity for Israeli residents sits under the Israel Securities Authority (Rashut Niyarot Erech, ISA), under the Securities Law and the separate Regulation of Investment Advice, Investment Marketing and Portfolio Management Law2. In practice you will see two delivery channels:
- Bank-channel brokerage. Your retail bank executes trades for you, often inside the same online portal you use for current accounts and credit cards. The bank is supervised by the Bank of Israel for its banking activity3 and by the ISA for the securities side.
- Independent (non-bank) investment houses. Standalone brokers and portfolio-management firms regulated by the ISA. Fees are typically lower per trade and product breadth is wider, but the platform is separate from your bank.
Israeli supervision is regulation of the firm (capital requirements, conduct rules, and complaint handling). It is not insurance on the market value of what you hold1. There is no Israeli equivalent of US SIPC coverage. Your investments rise and fall with the market.
The passport-first decision tree
Pick the row that matches your passport. The columns are the consequences a lifelong Israeli never has to think about.
| Origin | Israeli pooled funds OK? | Keep home-country broker? | Extra reporting forever |
|---|---|---|---|
| US citizen / GC | No (PFIC: Form 8621, §1291 by default7) | Yes if the US broker accepts Israeli-resident clients | US 1040 worldwide6, FBAR8, FATCA |
| UK | Yes | Often; ISA top-ups usually blocked once non-resident9 | None once UK non-resident under SRT9 |
| Canada | Yes | Generally yes; TFSA / RRSP rules require separate review | Ends once Canadian non-resident |
| South Africa | Yes | Yes if the local broker accepts non-resident clients | Ends once SA non-resident; exit-related disclosures separately |
That asymmetry is the proof this is not a Hebrew article in English. For a native Israeli, a TASE-listed pooled fund (keren ne'emanut) is the default rational choice. For a US-citizen oleh holding the same fund in a taxable account, that same fund is a PFIC, triggering Form 8621 and the §1291 punitive default method7.
What changes the day you become an Israeli resident
Once you are an Israeli resident for tax purposes you are taxed in Israel on worldwide income, with one large carve-out for new and returning residents: a ten-year exemption from Israeli tax on most foreign-source income and gains4. The exemption keeps Israel from taxing rent on your UK flat, dividends from your US brokerage, or gains on your South-African unit trusts during that window. It does not stop the home country from taxing them under its own rules.
From 1 January 2026 the picture shifted on reporting, not on the tax itself. Affected olim are now required to report the foreign-source amounts to the Israel Tax Authority during the exempt years, even though the tax remains zero4. Treat your foreign brokerage statements as a year-round bookkeeping job, not a Hebrew-side surprise on 30 April.
Israeli capital-gains mechanics that catch newcomers
On Israeli-source securities held in an Israeli account, capital gains and dividends are generally taxed at 25% for individuals (30% if you are a substantive shareholder), with the broker withholding at source5. For higher-earning olim, the 3% additional surtax (mas yasaf, מס יסף) kicks in once annual taxable income, including capital gains, exceeds roughly NIS 721,5605. The surtax is paid in the annual return, not by the broker, which is why the year-end reconciliation matters even for olim whose payroll looks done.
The PFIC problem in one paragraph for US olim
The IRS classifies almost every non-US pooled fund as a Passive Foreign Investment Company. Without an active Qualified Electing Fund election (which Israeli funds rarely support) the default §1291 method taxes distributions and gains at the highest historic ordinary income rate, with an interest charge running back to the year of acquisition7. For a US-person oleh, "buy the Israeli ETF" is the opposite of the right answer in a taxable account; the workaround for most US olim is to hold US-domiciled ETFs in a US brokerage account, then bring shekel cash in only as needed.
Opening the Israeli account as a new oleh
Banks and independent brokers expect roughly the same documents you used to open your bank account in the first months after aliyah10:
- תעודת עולה (teudat oleh) plus your תעודת זהות (teudat zehut).
- A linked Israeli current account for settlement and cash sweeps.
- A tax-residency declaration. For US persons this is a W-9; for non-US persons it is a W-8BEN plus a CRS self-certification form. The bank or broker collects both at account opening as part of FATCA / CRS compliance.
- A suitability questionnaire. Investment-marketing rules require it; answer honestly so the firm cannot recommend products mismatched to your risk profile2.
Independent investment houses generally open the account fully online; some bank channels still ask for a branch visit. English-language support is uneven and worth asking about before you commit, especially for tax-statement formats.
A simple worked decision
Take a 35-year-old US-citizen oleh, earning NIS 30,000 gross per month, with an existing US brokerage holding US-domiciled ETFs. Closing the US account and rebuilding the portfolio in Israeli ETFs would, in the worst case, convert every fund into a PFIC under §12917. The cleaner setup keeps the US account open, opens an Israeli independent broker for shekel cash plus a small allocation to Israeli single stocks (not Israeli pooled funds), and files FBAR8 plus US 10406annually. The Israeli ten-year exemption still covers the US portfolio's gains on the Israeli side4; the surtax only enters the picture once annual income crosses about NIS 721,5605.
Use your passport to choose, not the marketing. US-citizen olim default to a US brokerage that accepts Israeli residents, plus a small Israeli account for shekel cash. Non-US olim default to an Israeli account from day one. The Israel Securities Authority regulates the firm; it does not insure your investments.
No, not as a rule. Whether the account survives the move is a policy decision of that specific broker, not an Israeli legal requirement. Confirm with the broker in writing that they keep the account open for an Israeli-resident client and that the platform will issue tax forms after you move.
Once your total annual taxable income, including capital gains, crosses roughly NIS 721,560 for the year5. The broker does not withhold it; you reconcile it on the annual return. For most olim in their first working years it is not a factor, but a large one-off sale (equity comp, home-country property) can push income over the threshold in a single year.
Not as a no-tax event in either direction. A withdrawal to fund an Israeli account is a taxable US distribution, often with early-withdrawal penalties, regardless of Israeli tax status. The standard approach is to leave US qualified-plan assets where they are and let the US-Israel treaty plus the Israeli ten-year exemption interact at distribution time. This is a question for a cross-border professional, not a default playbook.
FBAR is triggered by aggregate balances across all non-US financial accounts exceeding USD 10,000 at any point in the year, not by activity8. A US-person oleh with several non-US accounts can cross the threshold even with a small Israeli brokerage balance once a bank, broker, and Bituach Leumi-linked account are summed.
