Answer first: which exemptions actually apply to you
Almost every new oleh is blindsided that ביטוח לאומי (Bituach Leumi) is two charges in one invoice. The first is the contribution that funds future pension, unemployment, and maternity rights. The second is the health levy that funds your Kupat Cholim cover. New olim get a roughly six-month break on the health levy starting from the aliyah date, a separate low-income exemption can suspend the contribution side when monthly earnings stay under the published floor, and US-employed olim working remotely for a genuinely foreign employer have a third arrangement to consider. Each of these has a different filing path and a different cost in lost insurance months.
Cross-border disclaimer
Exemption 1: the six-month new oleh health-contribution exemption
From the aliyah date, the National Insurance Institute applies a defined exemption window from the health-insurance contribution (also called the health levy, or היטל בריאות (hetel briut)). You are enrolled in a Kupat Cholim from your first month, you can use a clinic and the hospital system normally, and you are not billed for the health portion during the exemption months. The Bituach Leumi contribution portion (insurance for old age, maternity, unemployment, and reserve duty) operates under a separate rule set, covered in exemptions 2 and 3 below.
In practice, the exemption clock starts on the day you become a resident for Bituach Leumi purposes, which is the aliyah date stamped on your teudat oleh. The window runs for approximately six months from that date, so an oleh landing in February will typically see the health levy begin in August on the first invoice cycle after the window closes. There is no application step for this one because Bituach Leumi reads the aliyah date directly from the Misrad HaKlita transfer.
Exemption 2: the low-income contribution exemption
The second exemption applies to the Bituach Leumi contribution side, not the health levy. When your monthly Israeli income stays beneath a published floor (the floor is reset every January 1 against the average wage in the economy and is currently a small fraction of the average wage), Bituach Leumi can suspend contributions for that month. The reduced-rate bracket more broadly runs up to 7,703 NIS per month, which is 60% of the average wage in the economy, with a full bracket up to a monthly ceiling of 51,910 NIS above which no further contributions are due.
In practice, this exemption is most useful for olim who:
- Are not yet working in Israel and are living off savings or the Sal Klita basket.
- Are studying full-time in an ulpan, mechina, or university programme.
- Earn only a small amount of Israeli-source income while working remotely for a foreign employer.
What it does not do. A suspended month is a non-contributing month, so it does not count toward the qualifying period for unemployment cover, maternity allowance, or the contribution-history portion of the old-age pension. If you anticipate needing those rights inside your first few years (a planned pregnancy, an unstable contract, or a career change), opt in to voluntary minimum cover instead and treat the exemption as a fallback.
How to apply for the low-income exemption
- Register first, exempt second. Walk into your local Bituach Leumi branch within the first month after aliyah with your teudat oleh and teudat zehut. Open a file before you apply for any exemption — the file number is what every later form references.
- Declare your income status. Bring written proof of your current situation: an enrolment letter from an ulpan or university, a foreign employment contract translated to Hebrew or English, or a signed declaration if you are currently not earning.
- File the income-and-status declaration form. The branch clerk will hand you the relevant form (the form code rotates, so let them give you the current version rather than asking for an old number).
- Watch your file online. Bituach Leumi will either approve, ask for additional documents, or revert to a default invoice. Default invoices accrue interest if you ignore them, so respond inside thirty days even if to dispute.
Exemption 3: the foreign-employer arrangement for US-employed olim
A separate arrangement applies to Israeli residents who continue to work remotely for a genuinely foreign employer, most commonly a US-incorporated company with no Israeli subsidiary acting as the employer of record. Under this arrangement, neither the employee nor the foreign company pays Israeli Bituach Leumi on the US-source salary. The rationale is that the foreign employer cannot reasonably be required to withhold Israeli social insurance.
This is the cross-border friction point. Because Israel and the United States have not signed a Social Security totalization agreement, a US-citizen oleh whose foreign employer withholds US Social Security and Medicare does not get an Israeli credit for those contributions, and an Israeli resident who pays Bituach Leumi does not get a US credit. Without the foreign-employer arrangement above, an oleh employed by a US company can owe Bituach Leumi in Israel on the same earnings that already had Social Security and Medicare withheld in the US.
Two conditions matter for the arrangement to hold. The employer must be genuinely foreign, not an Israeli subsidiary acting as the payroll vehicle. And the employee must not be operating as a de facto Israeli contractor with the foreign company as a single client — Bituach Leumi will look through the arrangement when the substance is freelance work. This is the area where cross-border advice pays for itself, because the wrong structure costs years of mis-allocated contributions on both sides of the Atlantic.
Exemption comparison at a glance
| Exemption | Covers which part of the invoice | Who qualifies | Earns insurance months? | How to apply |
|---|---|---|---|---|
| New oleh health-contribution exemption | Health levy only | All new olim from the aliyah date | Health cover yes, contribution months no | Automatic — Bituach Leumi reads the aliyah date |
| Low-income contribution exemption | Bituach Leumi contribution side only | Olim whose monthly Israeli income stays under the published floor | No (months are suspended, not credited) | Walk into the local branch, file the income-and-status declaration form |
| Foreign-employer arrangement | Bituach Leumi contribution side, on the foreign-source salary | Israeli residents employed by a genuinely foreign employer | No on the foreign-source portion | Declare the foreign-employer structure; keep contracts and a translated job description |
What you lose during an exemption period
None of these exemptions is free. Bituach Leumi insurance works on a contributory model, so the qualifying periods for unemployment cover, maternity allowance, and the contribution-history portion of the old-age pension are calculated only from the months you actually contributed. A six-month gap in your first year is usually an acceptable trade. Years of gaps because you never converted from the low-income exemption to regular contributions when your income rose are not. The fix is to monitor your online file annually and convert as soon as your earnings cross the published floor.
The minimum contribution floor
Even when you do not qualify for any exemption, Bituach Leumi has a minimum monthly contribution that maintains your residency status in the system. Setting up a minimum monthly standing instruction is the cheapest way to keep your record continuous if you are between jobs or your Israeli-source income drops temporarily. This is the path most Israelis use during a planned career break, and it is the same path that olim use after the six-month health-contribution window closes when they are still in ulpan and not yet working.
Frequently Asked Questions
How soon after aliyah do I need to register with Bituach Leumi?
Within the first month, ideally inside the first two weeks. The aliyah date on your teudat oleh starts both the contribution clock and the health-contribution exemption clock. Registering early means the file already exists before any exemption application has to be filed.
Does the six-month new oleh exemption cover the contribution side as well as the health levy?
No. The new oleh window is specifically the health-contribution exemption. The Bituach Leumi contribution side is governed by exemption 2 (low income) and exemption 3 (foreign employer). Many olim only learn this when their first contribution invoice arrives, which is why the new oleh exemption is so often misdescribed.
I am a US citizen working remotely for a US employer. Do I still need to register with Bituach Leumi at all?
Yes. Registration is a residency function, not a payment function. You register so that the file exists, then you apply the foreign-employer arrangement in writing so that no contributions are billed on the US-source salary. Skipping registration creates ambiguity that Bituach Leumi will later resolve against you with back-invoices.
What happens to my old-age pension if I take every exemption available in year one?
Months you do not contribute do not count toward the contribution-history portion of the future old-age pension. Most Israelis hit the full qualifying period easily over a working life, so a few exempt months in year one are a non-issue. A multi-year exemption record is a real issue and is where olim should consider voluntary minimum contributions instead.
Can I claim the low-income exemption retroactively if I never applied?
In limited circumstances yes, but Bituach Leumi prefers prospective filings and will often require a written explanation for why the application was delayed. Keep the documents you would have filed (income proof, status letters) so that a retroactive request has the evidence it needs.
Does the foreign-employer arrangement affect my US tax filings?
No, the arrangement is an Israeli Bituach Leumi rule. You still file your annual US return, still claim Foreign Earned Income Exclusion or the Foreign Tax Credit where relevant, and still meet your FBAR and Form 8938 thresholds. PFIC and pooled-investment rules are out of scope for this article because no investment vehicle is involved in the Bituach Leumi exemption decision.
What to do this month
If you have arrived inside the last 30 days, the next step is to register at your local Bituach Leumi branch with your teudat oleh and teudat zehut, open a file, and confirm in writing which of the three exemptions apply to you. From there, file the income-and-status declaration form for the low-income exemption if your earnings will stay under the floor, or declare the foreign-employer arrangement if you are continuing to work for a US company. The next article in this path covers how Bituach Leumi payments actually work once an exemption period ends.
