Two Possible Exemptions for Olim
Contributing to ביטוח לאומי (Bituach Leumi) is mandatory for Israeli residents, but new olim may qualify for two separate exemptions that reduce or eliminate those contributions in the early years. Understanding both — and the conditions for each — can save you thousands of shekels.
Exemption 1: The 12-Month New Oleh Exemption
New olim who earn below a certain income threshold may qualify for a 12-month exemption from Bituach Leumi contributions. As of recent years, the threshold is approximately 627 NIS per month (about 20% of the average wage). If your income in Israel stays below this amount during your first year, you can apply for a full exemption.
In practice, this exemption is most relevant for olim who:
- Are not yet working in Israel (living off savings or Sal Klita)
- Are studying full-time in an ulpan or university
- Earn minimal Israeli income while working remotely for a foreign employer
Important: The exemption applies to Bituach Leumi contributions, not to the health tax (Hetel Briut). You must still maintain your Kupat Cholim membership and pay the minimum health levy even during the exemption period.
How to Apply for the 12-Month Exemption
- Visit your local Bituach Leumi branch within the first few months of arriving in Israel.
- Bring your Teudat Oleh, Teudat Zehut, and proof of your current income (or lack of).
- Fill out form 652 or the equivalent new oleh exemption application.
- Bituach Leumi will review your situation and notify you of approval.
If you don't apply proactively, Bituach Leumi may still send you minimum payment invoices. Apply early to avoid accumulating debt.
Exemption 2: The US Employer Exemption (2026+)
A significant exemption applies to Israeli residents who are employed by a US company (rather than an Israeli employer). Under this arrangement:
- The employee is not required to pay Israeli Bituach Leumi on their US-source salary.
- The US employer is also not required to make Bituach Leumi contributions on behalf of the Israeli-resident employee.
- This was formalized in legislation effective from 2026 as part of the broader tax reform for olim.
To benefit from this exemption, your employment arrangement must meet specific criteria. The employer must be genuinely foreign (not an Israeli subsidiary), and the employee must not be considered a de facto Israeli employee. This is a complex area — consult a tax advisor familiar with olim taxation before relying on this exemption.
What You Lose During an Exemption Period
Bituach Leumi exemptions are not free — they come at a cost to your future benefits. Months in which you don't contribute do not count toward qualifying periods for unemployment benefits, maternity pay, and the old-age pension. For most new olim, this is an acceptable tradeoff in year one, but be aware of the implications if you're planning a family or anticipating career changes.
The Minimum Contribution Floor
Even if you don't qualify for an exemption, Bituach Leumi contributions are subject to a minimum floor (approximately 150-200 NIS/month as of 2025). If your income is very low, you'll pay this minimum rather than a percentage of income. This minimum maintains your residency status within the system.