Does the ten-year exemption cover Bituach Leumi?
Israel's ten-year exemption for new residents is an income-tax benefit. It does nothing about national insurance or the health levy, which are charged under separate laws with their own bases. So an oleh living on foreign salary, rent or investment income can owe ביטוח לאומי (Bituach Leumi) every month while owing no Israeli income tax at all.
This confuses almost everyone, and the reason is linguistic as much as legal. In English you arrived with one word, tax, and Israel hands you three charges under it. Nobody at your aliyah appointment separates them for you, and the benefit that defines the aliyah decade switches off exactly one of the three. The other two keep running quietly in a system you have not registered with yet, which is how a first Bituach Leumi bill arrives eighteen months in with arrears attached.
General information, not advice
What are the three charges, and what is each one's base?
They are three separate levies with three separate legal homes, and only the first one is touched by your new-resident status.
- Income tax (מס הכנסה (Mas Hachnasa)) sits in the Income Tax Ordinance and is administered by the Israel Tax Authority. A new resident gets a ten-year exemption on foreign-source income, and from 1 January 2026 that benefit became report-but-still-tax-exempt for newly arriving olim: exempt from Israeli tax inside the window, but reportable to the Tax Authority8.
- The national insurance contribution funds old age, disability, maternity, unemployment and the other Bituach Leumi branches. It is collected by the National Insurance Institute on its own published scale, which has no new-resident clause beyond the short one described below1.
- The health levy (היטל בריאות (hetel briut)) funds your קופת חולים (Kupat Cholim) membership. It appears on the same invoice as the contribution but is a different charge with its own rate, and it is the only one of the three with a genuine new-oleh exemption4.
The table below is the version worth keeping. Read it down your own income column, not across.
| Your income | Israeli income tax inside the ten years | National insurance | Health contribution | What the home country may still take |
|---|---|---|---|---|
| Salary from a foreign employer, worked from Israel | Exempt in the window, reportable for olim arriving from 1 January 20268 | Charged. Bituach Leumi states that an Israeli resident working for a foreign employer pays at the rate set for non-work income1 | Charged on the same scale, 5.17% of the health component1 | US citizens: worldwide filing continues, and self-employment tax is unaffected by the foreign earned income exclusion9. UK: mandatory National Insurance generally ends after 52 weeks working abroad13 |
| Rent from property left at home | Exempt in the window, reportable from 1 January 20268 | Assessed as income not from work; confirm with the Institute which streams it counts1 | Same non-work scale as the contribution | UK rental income stays UK-taxable through Self Assessment even when you live abroad14 |
| Dividends and interest from a foreign portfolio | Exempt in the window, reportable from 1 January 20268 | Same non-work category in principle; the Institute decides what enters your assessed income, so ask before you assume | Same non-work scale as the contribution | US citizens are taxed on worldwide investment income regardless of Israeli residency |
| A foreign pension | Exempt in the window, reportable from 1 January 20268 | Assessed as income not from work unless the Institute classifies it otherwise | Same non-work scale as the contribution | The paying country may withhold at source under its own rules |
| No income at all | Nothing to exempt | Minimum NIS 143 a month1 | Minimum NIS 123 a month2 | Nothing, except that US citizens still file a return every year |
How does Bituach Leumi set your base when you have no Israeli employer?
It classifies you by what you are not. A person who is not working, and not covered as the spouse of an insured Israeli resident, falls into the non-worker category3 and is billed directly rather than through a payroll. The floor is fixed and it applies even when nothing at all is coming in: NIS 143 a month° in national insurance plus NIS 123 a month° in health contributions, NIS 266 in total1.
Once income appears that is not from work, the flat minimum turns into a percentage on a banded scale. Bituach Leumi publishes it as follows.
| Monthly slice of income not from work | National insurance | Health | Combined |
|---|---|---|---|
| Up to NIS 3,442 | Exempt | Exempt | 0% |
| The next slice, up to NIS 7,703 (reduced rate) | 6.92% | 5.17% | 12.09% |
| Above that, to the NIS 51,910 ceiling (full rate) | 7% | 5.17% | 12.17% |
Rates and thresholds as published by the National Insurance Institute1, effective 1 January 2026°. They are re-set each January, so re-read them at the start of every year rather than carrying last year's number forward.
What does this cost in practice, and what does the US side add?
Take the Institute's own published example. You are a new oleh with no Israeli employer, and in January 2026 you receive NIS 12,000 from a foreign employer and nothing else. The first NIS 3,442 is exempt, leaving NIS 8,558. The reduced rate of 12.09% applies to the NIS 7,703 slice, which is NIS 931.29, and the full rate of 12.17% applies to the remaining NIS 855, which is NIS 104.05. The month costs NIS 1,035, so a full year of the same income costs roughly NIS 12,4001. Your Israeli income tax on that same salary, inside the ten-year window, is nil8.
Now add a US passport and make the income self-employed rather than salaried. Say your net self-employment earnings for the year are USD 40,000. US self-employment tax runs at 15.3%, which is USD 6,120, and it applies from as little as USD 400 of net earnings10. Living abroad does not change that, and the foreign earned income exclusion, which many olim assume solves everything, explicitly does not reduce self-employment tax9. So the American freelancer is paying a social charge on both sides of the ocean in the same year that Israel is charging them no income tax at all. The arithmetic is not a mistake by either country. It is the absence of a treaty that would assign the charge to one of them.
Does the new-oleh exemption help, and when exactly does it stop?
It helps for six months, it covers only the health levy, and it is conditional on income. The National Insurance Institute exempts new olim from health-insurance contributions for six months from the day of aliyah, provided they have no income or earn under NIS 688 a month°. A further six months, taking it to twelve, is available for months in which subsistence benefits from משרד הקליטה (Misrad HaKlita) were actually paid4.
Read that threshold twice, because it is the sentence olim skip. An oleh living on foreign rent or a foreign salary is over NIS 688 in the first week, which means the six-month break does not apply to them from the start. The window that feels like a grace period is designed for someone with no means, not for someone whose means happen to sit in another currency. Set your clock from the aliyah date and assume the health levy starts in month one unless Bituach Leumi has confirmed otherwise in writing.
How does a wrong estimate quietly become a debt?
By arithmetic and time, not by any single dramatic event. Non-workers and self-employed people pay their own contributions on a quarterly cycle, with the stub for October, November and December falling due on 25 February 2026 and the pattern repeating in April, July and October6. Nothing is deducted at source for you, because there is no Israeli payroll in the picture. If the income the Institute holds for you is too low, or you never opened a file at all, the shortfall accrues.
Bituach Leumi is explicit about what happens next: self-employed people and non-workers who accumulate a contributions debt are charged fines and linkage differentials under law, and the Institute's advice is to contact the branch as soon as possible so the debt stops growing, with reductions and installment arrangements available on request5. Two years of an understated foreign income is not a rounding error by the time it surfaces, and it usually surfaces at the worst moment, when you claim a benefit or need a clearance.
Three habits that keep this boring
- Register your status honestly at the start. Open your file with Bituach Leumi in your first month with your תעודת עולה (Teudat Oleh) and state what you actually live on, including income from abroad. Under-declaring does not save money, it defers it with fines attached5.
- Set a realistic assessed income, then update it when reality moves. A foreign salary in another currency changes in shekel terms without you doing anything, so the figure that was right in March may be wrong by September.
- Diarise the review. Put the quarterly payment dates and one annual January check in your calendar6. January is when the rates and thresholds re-set.
Does my passport change any of this?
It changes whether anything you pay at home counts here. Israel publishes the list of countries it has social security conventions with, and the conventions are what arrange exemptions from double payment of contributions. The comprehensive list includes the UK, France, Germany, Italy, the Netherlands and a dozen others. Canada has only a limited convention, excluding Quebec. The United States is not on either list, and the Institute notes specifically that the Israel-USA Friendship and Shipping agreement is not an agreement in the field of social security7.
US-citizen olim: does fixing the currency problem make this worse?
It can, and this is the trap worth naming before you act on the rest of the article. A natural response to a shekel bill on dollar income is to move the portfolio to Israel and hold Israeli pooled funds instead. For a US citizen or green-card holder, every non-US pooled fund is a Passive Foreign Investment Company: an annual Form 8621 obligation, and under the default treatment a punitive tax on the gain with an interest charge attached12. Nothing in the Israeli system flags it, because it is not an Israeli problem, and the ten-year exemption does not reach it either, because the charge falls on the US side.
The practical point is that the two problems have different solutions. The Bituach Leumi charge is answered by correct registration and a realistic assessed income. The US investment-tax problem is answered by cross-border advice before you buy anything, not by changing where your money sits. UK, Canadian, South African, French and Australian olim do not carry the PFIC rule, though their own reporting obligations may continue for a period after aliyah.
What do newcomers get wrong most often?
- Treating the ten-year exemption as a ten-year holiday from everything. It is an income-tax benefit, and from 1 January 2026 it is a reportable one for new arrivals8. It never covered the contribution or the health levy.
- Assuming that no Israeli income means no Israeli charge. A non-worker with no income at all still owes NIS 266 a month1.
- Assuming the six-month break applies to them. It is conditional on income under NIS 688 a month, which foreign salary or rent clears immediately4.
- Waiting for an invoice. There is no Israeli employer deducting anything, so silence means the file is wrong or missing, not that nothing is owed6.
- Reading American warnings with a British or European passport. If your country has a comprehensive convention with Israel, the double-charge framing is not yours7.
- Letting an old assessed income ride through a currency move. The shekel value of a foreign salary drifts on its own, and the gap becomes a debt with linkage differentials5.
Check your understanding
You made aliyah four months ago, you have no Israeli employer, and you receive rent from a property back home worth about NIS 9,000 a month. What is your Israeli position?
Ask which statute each of the three charges lives in, and what the new-oleh health exemption is actually conditional on.
Do this before your next quarterly stub falls due
Israel's ten-year exemption for new residents is an income-tax benefit only. National insurance contributions and the health levy are charged under separate laws, so an oleh living on foreign salary, rent, dividends or a foreign pension can owe Bituach Leumi every month while owing no Israeli income tax. A non-worker with no income at all pays a minimum of NIS 143 a month in national insurance plus NIS 123 in health contributions, NIS 266 in total. Once there is income that is not from work, the first NIS 3,442 a month is exempt and the slices above it are charged at 12.09% and then 12.17% up to the NIS 51,910 ceiling, and Bituach Leumi states explicitly that an Israeli resident working for a foreign employer is charged on this same non-work scale. The new-oleh relief is six months from the aliyah date, health contributions only, and conditional on earning under NIS 688 a month.
No. The ten-year benefit for new residents sits in the Income Tax Ordinance and exempts foreign-source income from Israeli income tax, which from 1 January 2026 is reportable for newly arriving olim even while it stays untaxed. National insurance contributions and the health levy are charged under separate laws by the National Insurance Institute, on their own published scale.
Yes. A person who is not working, and who is not covered as the spouse of an insured Israeli resident, is billed as a non-worker at the minimum rate: NIS 143 a month in national insurance plus NIS 123 a month in health contributions, NIS 266 in total. The bill comes directly to you, because there is no Israeli payroll deducting it.
The first NIS 3,442 a month is exempt. The slice above that up to NIS 7,703 is charged at 12.09%, being 6.92% national insurance plus 5.17% health, and the slice from there to the NIS 51,910 ceiling is charged at 12.17%. In the worked example published by the National Insurance Institute, NIS 12,000 a month from a foreign employer produces NIS 1,035 a month in contributions.
Usually not. The exemption covers health-insurance contributions for six months from the aliyah date and is conditional on having no income or earning under NIS 688 a month, so a foreign salary or foreign rent clears the threshold immediately. A further six months is available only for months in which Misrad HaKlita subsistence benefits were actually paid.
Because there is no US-Israel social security convention. Israel publishes its convention list and the United States is absent, with the Institute noting that the Israel-USA Friendship and Shipping agreement is not a social security agreement. The IRS will release a US citizen from self-employment tax only against a certificate of coverage under a totalization agreement, and Israel cannot issue one.
No, and applying US warnings to a UK passport is a common error. Israel has had a comprehensive convention with the UK since 1 November 1957, covering employees and self-employed people, and these conventions exist partly to arrange exemption from double payment of contributions. Israel has only a limited convention with Canada, which excludes Quebec.
The shortfall accrues quietly and becomes a debt. Non-workers and self-employed people pay quarterly with nothing deducted at source, and the Institute charges fines and linkage differentials on accumulated contribution debts. Its own guidance is to contact the branch early, because reductions and installment arrangements are available and the debt otherwise keeps growing.
US citizens and green-card holders should treat that as a separate decision with its own tax consequence. Every non-US pooled fund is a Passive Foreign Investment Company for US purposes, bringing an annual Form 8621 obligation and punitive default treatment of the gain. The Israeli ten-year exemption does not reach a US charge, and the Israeli system does not flag it.