If your centre of life moves to Israel by 31 December 2026, the salary or business income you earn in Israel is exempt from Israeli income tax through 2030, up to 600,000 NIS in 2026 and 1,000,000 NIS in each of 2027 and 2028. The test is the day you actually move, not the date on your teudat oleh, and Bituach Leumi contributions are not part of the deal.
This is general information, not tax, legal, or financial advice. Israeli and home-country tax interact in complex ways for olim. The Israeli figures below come from the Israel Tax Authority circular and service page for this temporary order and from the 2026 payroll deductions booklet; the National Insurance and health contribution rates come from Bituach Leumi, and each figure carries its own citation. Cross-border cases turn on individual facts, and a qualified cross-border professional is the usual route for confirming how any of this applies to one household.
Is it true that Israeli salary is tax-free if you make aliyah before the end of 2026?
Yes, up to an annual ceiling, for earned income only, and for five tax years. The Encouragement of Aliyah to Israel and Return to It Law (Temporary Order), 5786-2026, was enacted on 31 March 2026 as sections 8 and 9 of the 2026 Economic Efficiency Law15. It gives an עולה חדש (Oleh Chadash) (new immigrant) or a veteran תושב חוזר (Toshav Chozer) (returning resident) who became an Israeli resident between 5 November 2025 and 31 December 2026 an exemption from income tax on salary and business income produced in Israel while resident, from tax year 2026 to the end of 20302. The rate on the exempt slice is 0%; what changes each year is how much income fits under it:
| Tax year | Exempt ceiling on Israeli earned income | Years since a January 2026 aliyah |
|---|---|---|
| 2026 | 600,000 NIS (prorated by days if you arrive during the year) | Year 1 |
| 2027 | 1,000,000 NIS | Year 2 |
| 2028 | 1,000,000 NIS | Year 3 (claw-back window opens) |
| 2029 | 350,000 NIS | Year 4 (claw-back window closes) |
| 2030 | 150,000 NIS | Year 5, then the order ends |
Those five ceilings appear identically in the circular, the English immigrant guide and the 2026 payroll deductions booklet124. Income above the ceiling is taxed at the ordinary brackets, starting from the lowest bracket rather than from where the exempt slice left off, and the benefit is granted on top of every other olim relief, including the 10-year exemption on foreign income under section 14 of the Ordinance and your olim credit points14. This is a different statute from the 1 January 2026 reporting change that made the annual return mandatory for post-2026 olim; that change is covered in the Doch Shenati guide, and this page stays on the earned-income window.
Who qualifies, and does your teudat oleh date count or the day you actually moved?
The day your centre of life actually moved to Israel is the test; the date printed on the תעודת עולה (Teudat Oleh) issued by משרד הקליטה (Misrad HaKlita) is not. The circular spells this out with three cases: someone who received a teudat oleh in 2020 but kept their centre of life abroad until 2026 qualifies; someone who moved to Israel in 2021 and was only recognised as an oleh in 2026 does not; and someone who holds a 2026 certificate but moves in 2028 does not1. Almost every oleh planning around this deadline assumes the certificate date is what the Israel Tax Authority reads, and it is the assumption that costs the most.
Two routes into the benefit exist. You became an Israeli resident for the first time as an oleh, or you returned as a veteran returning resident after at least 10 consecutive years as a foreign resident, in both cases inside the 5 November 2025 to 31 December 2026 window12. The certificate date does not set the clock, but the certificate itself is a second, cumulative condition: on the oleh route you must hold an oleh visa or teudat oleh under the Law of Return, or belong to a class entitled to sal klita under the Absorption Basket Law, and on the returning-resident route you must hold a תעודת תושב חוזר (Teudat Toshav Chozer) issued by Misrad HaKlita1. Returning residents are the ones who tend to miss this, because nothing else in the move requires the certificate. Centre of life is judged on the whole picture: days in Israel and frequency of visits, where your permanent home is, where your spouse and children live, and where your business and social ties sit1.
Electing an acclimation year does not move the date. Under section 2(e) of the order, someone who moved in January 2025 and chose an acclimation year is treated as resident before the window and fails the test, while someone who moves during 2026 qualifies even if they ask for their first year to count as an acclimation year1. How that election works in its own right is in the acclimation year guide.
What income counts, and what is left out?
Earned income from work in Israel counts: salary, business and professional income under sections 2(1) and 2(2) of the Income Tax Ordinance, produced or accrued in Israel while you are an Israeli resident1. It must also reflect your own contribution to producing it: business income you received as a gift does not qualify, even if it otherwise fits sections 2(1) or 2(2)1. Everything the Ordinance calls other income stays outside the order:
| Income type | Under the 0% order? | What applies instead |
|---|---|---|
| Salary from an Israeli employer | Yes, up to the annual ceiling | Ordinary brackets above the ceiling, from the lowest bracket |
| Self-employed business or professional income earned in Israel | Yes, up to the annual ceiling | Ordinary brackets above the ceiling |
| Salary, management or consulting fees paid by a transparent entity you hold | Yes | Profit attributed to a substantial shareholder from that entity is excluded |
| Salary from a relative, or from an entity you or a relative hold 25% or more of (a company you own outright is carved out) | Limited | Capped at 140,000 NIS a year, on the annual return only, and counted inside your general ceiling rather than added on top of it |
| Israeli interest, dividends, rent, capital gains | No | Ordinary rules, including section 122 on residential rent |
| Foreign-source income of any kind | No | The separate 10-year exemption under section 14, now reportable for 2026 arrivals |
The relative rule catches family businesses, and it catches your own company too. A relative under section 88 is a spouse, sibling, parent, grandparent or descendant, plus any entity that you or one of them holds 25% or more of, directly or indirectly, alone or with others1. The circular carves out one case only: a company you own outright is not a relative, so a salary from your wholly owned company is treated like any other salary. Hold 25% or more without owning it outright and the company is a relative, which is why the circular's own example caps a 200,000 NIS salary from a 30%-held trading company at 140,000 NIS1. That 140,000 NIS sits inside your year's general ceiling, not on top of it. The circular's own combined example makes this arithmetic concrete: a 2026 oleh with stakes in three companies has 500,000 NIS from a wholly owned company (fully exempt, since outright ownership is carved out of the relative and transparent-entity rules), 400,000 NIS attributed from a 50%-held transparent company (none of it eligible, because attribution from a transparent entity is excluded once you are a substantial shareholder in it), and a 200,000 NIS salary from a 30%-held company capped at 140,000 NIS as relative income. That is 1,100,000 NIS of attributed income against 640,000 NIS notionally exempt (500,000 plus 140,000), and 640,000 is over the 600,000 NIS general ceiling for 2026, so only 600,000 NIS is exempt and the remaining 500,000 NIS (1,100,000 minus 600,000) is taxable1. Income from a relative can only be claimed on the annual return, never through a payroll tax coordination13. One footnote in the circular is easy to miss: for 2030 it puts the relative cap at 150,000 NIS, level with that year's general ceiling1.
How does a 0% Israeli rate interact with tax at home?
Israeli treatment
In Israel the order is a domestic exemption layered on the olim package you already have. Foreign income stays exempt under section 14 for ten years, Israeli earned income is exempt under this order up to the ceiling, and where a job is performed partly abroad the foreign part is fully exempt under section 14 while only the Israeli part counts against the ceiling1. Working from Israel for a foreign employer is addressed directly: under section 3 of the order, a foreign-resident entity whose Israeli-source profit arises solely from your personal work is itself exempt in Israel for 2026 to 2030, even where your presence would otherwise create a permanent establishment, unless you are a substantial shareholder of it1. A foreign employer does not run Israeli payroll withholding, so that salary reaches the 0% through your annual return, and the filing duty stays in place for that reason alone3.
Home-country treatment
Treaty coordination
A treaty matters only if both countries still treat you as resident after the move. When that happens, the tie-breaker rules decide which country is your treaty residence, and treaties typically give the country where the work is physically performed the right to tax employment income. Israel exercising that right at 0% does not create tax at home by itself, but the relief method at home does: a credit-method country has no Israeli tax to credit, while an exemption-method country leaves the income alone either way. The United States is the exception because it taxes its citizens regardless of treaty residence, which is why the US tab above turns on the exclusion rather than the credit.
How do you get the 0% onto your payslip?
Through an online תיאום מס (Teum Mas) (tax coordination, often written tiyum mas) filed with the Israel Tax Authority on Form 116ayin (טופס 116ע), after which your employer withholds at 0% up to an in-year cap that is lower than the annual ceiling3. The full entitlement is examined only on the annual דוח שנתי (Doch Shenati) (Form 1301), which is where the rest of the exemption comes back3.
| Your status | In-year route | In-year cap (2026, full year) | Above the cap |
|---|---|---|---|
| Employee not required to file an annual return | Online teum mas, Form 116ayin | 300,000 NIS | Claimed on Form 1301 |
| Employee or self-employed required to file | Online teum mas, or reduced advance payments through a representative | 500,000 NIS | Claimed on Form 1301 |
| Salary from a relative | None | Not available in-year | Up to 140,000 NIS a year on Form 1301 only, inside your general ceiling, not on top of it |
Form 116ayin is not just a cover sheet for the attachments: it carries its own declarations, on top of the ordinary Form 116 details. You declare that your centre-of-life move falls inside the 5 November 2025 to 31 December 2026 window, that you intend to remain an Israeli resident through the end of the tax year, that the income is not paid by a relative, that it is not business income received as a gift, that it is not profit attributed to you from a partnership or transparent entity in which you are a substantial shareholder without owning it outright, and that you did not receive Bituach Leumi (National Insurance) allowances in any year from 2016 to 20251. That last declaration reaches further than it looks: a veteran returning resident, by definition abroad for the prior decade, is exactly the profile most likely to have drawn a National Insurance allowance at some point in it, and drawing one blocks the payroll route regardless of how the residency test comes out.
The application to the Israel Tax Authority carries a completed Form 116ayin, your teudat oleh or returning-resident certificate, the Population and Immigration Authority entry-and-exit printout for 2016 to 2025 for you and your spouse, payslips or income confirmations from every payer, and the completed eligibility simulator file that the service page supplies as a spreadsheet; attaching the simulator's printed result is a necessary condition for the application to be processed at all, not one attachment among several3. The approval is a withholding certificate for employees or a reduced-advances certificate for the self-employed, and it does not remove an annual filing duty that exists for another reason, such as being self-employed, having a foreign employer or earning above the regulation threshold3.
The entry-and-exit printout feeds a days test that gates the payroll route only. In each of 2016 to 2025, you and your spouse must each have spent no more than 90 days in Israel, counting entry and exit days, with up to three exception years that cannot be 2016 or 2025: two years of up to 182 days and a third of up to 150. On top of that, for every year from 2018 to 2025, the days in Israel for that year and the two before it must total fewer than 4251. Pass it and, for the payroll route, you are treated as having moved your centre of life inside the window. Fail it and the teum mas route closes, but not necessarily the benefit: the exemption can still be claimed on the annual return, and only if the assessing officer is persuaded on the evidence that your centre of life did move inside the window, examined on the whole picture rather than read off the days table1. In the US you would think of this as the difference between adjusting withholding on a W-4 and waiting for the refund; in Israel, anyone who visited often before the move is pushed onto the refund route and has to make the centre-of-life case there.
What happens if you land in the middle of 2026?
Your 2026 ceiling is prorated by days. Under section 2(d) of the order, someone who becomes resident during 2026 gets the 2026 exemption ceiling multiplied by the days from arrival to 31 December over 365, and the in-year caps are prorated the same way1. The circular's own example is a 1 July 2026 arrival: 183 days out of 365 turns the 300,000 NIS in-year cap into about 150,000 NIS, or 250,000 NIS for someone required to file1. Applied to the annual ceiling, the same fraction takes 600,000 NIS to roughly 300,800 NIS for that arrival date. From 2027 the full 1,000,000 NIS ceiling applies with no proration.
Worked example, mid-year arrival: an employee lands on 1 July 2026 and earns 30,000 NIS a month from an Israeli employer, 180,000 NIS by year end. That sits under the prorated exemption ceiling, so all of it is exempt for 2026. The payroll route, though, is capped at about 150,000 NIS for someone not required to file, so tax is withheld on the last 30,000 NIS during the year and claimed back on Form 130113. From January 2027 the same salary, 360,000 NIS a year, is fully exempt under the 1,000,000 NIS ceiling, but the 300,000 NIS payroll cap still leaves the last 60,000 NIS to be withheld during the year and reclaimed on the annual return. The first-year mechanics, including how a part-year Israeli tax year is assessed, are in the part-year first tax year guide.
Worked example: 750,000 NIS of Israeli salary in 2026
The circular's first example is an oleh who lands on 1 January 2026 and earns 750,000 NIS from work performed entirely in Israel, plus 100,000 NIS of rent from an Israeli apartment. The first 600,000 NIS of salary is exempt, the remaining 150,000 NIS is taxable at the section 121 brackets, he still receives the resident and new-immigrant credit points, and the rent is taxed under section 122 or the brackets, outside the order1. Running the 150,000 NIS through the 2026 annual brackets, which start again from the lowest bracket, gives 10% on the first 84,120 NIS (8,412 NIS), 14% on the next 36,600 NIS (5,124 NIS) and 20% on the last 29,280 NIS (5,856 NIS)°, about 19,400 NIS° before credit points4. With 2.25 resident points and the single extra oleh point of months 1 to 12 on the post-2022 schedule10, each worth 242 NIS° a month, the credit is 9,438 NIS and the income tax on the salary lands near 9,950 NIS° for the year4.
Without the order, 750,000 NIS run through the same 2026 brackets comes to roughly 237,500 NIS° before credit points4. The difference for this one oleh in 2026 is on the order of 218,000 NIS of Israeli income tax, before Bituach Leumi and health contributions, which the next sections cover. How the credit points behave on their own, including their back-loaded 54-month schedule, is in the credit points and take-home guide.
What claws the exemption back if you leave in 2028 or 2029?
Two conditions, and both must hold: you ceased to be an Israeli resident during 2028 or 2029, and you spent fewer than 75 days in Israel in one of those years1. If both are met, section 4 of the order cancels the exemption retroactively and the tax on your Israeli income for every year you enjoyed it is recomputed without it1. A temporary absence is not a trigger: leaving Israel for most of 2028 while keeping your centre of life here, and then coming back, does not cancel the 2026 and 2027 benefit1.
Read against your own clock, a January 2026 aliyah puts the exposure in years 3 and 4 and lifts it from 1 January 2030. Nothing in the order penalises leaving in 2030 or later, and nothing penalises leaving in 2027 either, which is a gap the text does not close. You can also waive the exemption in full or in part under section 121, which occasionally matters for someone whose home-country position works better with Israeli tax actually paid; that is a cross-border calculation rather than an Israeli one.
Does 0% income tax mean 0% Bituach Leumi and health contributions?
No. The order exempts מס הכנסה (Mas Hachnasa) (income tax) and says nothing about ביטוח לאומי (Bituach Leumi) (National Insurance) or health contributions, which run on their own law and their own deduction tables. For an employee the employer deducts health contributions of 3.23%° on the part of the salary up to 60% of the average wage, 7,703 NIS° a month in 2026, and 5.17%° on the part above it, up to a monthly ceiling of 51,910 NIS°, the maximum income on which either health or National Insurance contributions are collected; a self-employed person pays the same health rates directly611. The employee share of National Insurance comes off the same payslip across the same two bands, at 1.04%° and 7%°11. Nothing is collected above the ceiling: on the circular's 750,000 NIS example, 62,500 NIS a month, the last 10,590 NIS of each month's salary carries no contribution at all. The one olim-specific relief on that side is unrelated to salary: a new oleh with no income, or income below 688 NIS° a month, is exempt from health contributions for 6 months from the aliyah date, extendable to 12 months while Misrad HaKlita subsistence payments are being made7. So a 0% payslip is not a deduction-free payslip, and a gross-to-net estimate that only zeroes the income tax line will overstate take-home.
What this means when you are choosing a landing date
For a salaried or self-employed oleh, the difference between moving your centre of life on 31 December 2026 and on 2 January 2027 is the whole package: a 31 December arrival has a 2026 ceiling prorated to a single day but keeps the full 1,000,000 NIS ceilings for 2027 and 2028 and the smaller ones after, while a January 2027 arrival is outside the window entirely12. Four facts decide how much the window is worth to one household: the date the centre of life genuinely moves, whether the income is earned in Israel rather than passive or foreign, whether 2028 and 2029 will be spent in Israel, and whether the days test allows the payroll route or the exemption has to be argued on the annual return. The earlier reporting change still applies to every 2026 arrival, so the annual return that claims the rest of this exemption is the same return that discloses foreign income and assets. The other timing question, which side of a 1 January to land on for the reporting rules and the first part-year return, is a separate calculation and is worked through in the guide to timing aliyah around the tax rules.
Olim and veteran returning residents whose centre of life moves to Israel between 5 November 2025 and 31 December 2026 pay 0% Israeli income tax on salary and business income earned in Israel through 2030, up to 600,000 NIS in 2026, 1,000,000 NIS in each of 2027 and 2028, 350,000 NIS in 2029 and 150,000 NIS in 2030. The actual move date is the test, not the teudat oleh date; passive and foreign income are outside it; the exemption is clawed back only if you cease residency in 2028 or 2029 and spend fewer than 75 days in Israel that year; and Bituach Leumi and health contributions are unaffected.
Yes, for Israeli income tax and up to an annual ceiling. The Encouragement of Aliyah to Israel and Return to It Law (Temporary Order), 5786-2026, exempts salary and business income earned in Israel by an oleh or veteran returning resident who became resident between 5 November 2025 and 31 December 2026, from tax year 2026 through 2030. The ceilings are 600,000 NIS in 2026, 1,000,000 NIS in 2027 and 2028, 350,000 NIS in 2029 and 150,000 NIS in 2030. Income above the ceiling is taxed at the ordinary brackets, and Bituach Leumi and health contributions are still deducted.
The day your centre of life actually moved to Israel counts, not the certificate date, but you still need the certificate. A first-time Israeli resident who holds an oleh visa or teudat oleh under the Law of Return, or a returning resident who spent at least 10 consecutive years abroad and holds a teudat toshav chozer issued by Misrad HaKlita, qualifies if the move falls between 5 November 2025 and 31 December 2026. The Israel Tax Authority circular gives the cases: a 2020 certificate holder who only settled in 2026 qualifies; someone who moved in 2021 and was recognised as an oleh in 2026 does not; a 2026 certificate holder who moves in 2028 does not. Choosing an acclimation year does not move the date.
Five tax years, 2026 to 2030, and then it ends. The exempt ceiling is 600,000 NIS in 2026 (prorated by days if you arrive during 2026), 1,000,000 NIS in 2027, 1,000,000 NIS in 2028, 350,000 NIS in 2029 and 150,000 NIS in 2030. The rate on the exempt slice is 0% every year; only the ceiling changes. Someone arriving on 1 July 2026 gets roughly half the 2026 ceiling and the full ceilings from 2027.
The exemption is cancelled retroactively only if two conditions both hold: you ceased to be an Israeli resident during 2028 or 2029, and you spent fewer than 75 days in Israel in one of those years. Then the tax on your Israeli income for the exempt years is recomputed without the exemption. A temporary absence that does not sever your centre of life does not cancel the 2026 and 2027 benefit, and leaving in 2030 or later carries no claw-back.
Yes. The order is granted in addition to every other olim relief, and the circular's own example shows an oleh with 750,000 NIS of salary taking 600,000 NIS exempt, paying tax on 150,000 NIS from the lowest bracket, and still receiving resident and new-immigrant credit points. Below the ceiling the points have no income tax to reduce, so on a fully exempt salary they are effectively unused; above it they cut the tax on the excess by 242 NIS a month per point in 2026.
Yes, as Israeli earned income, because the work is performed in Israel while you are resident. Section 3 of the order also exempts the foreign employer itself from Israeli tax on profit that arises solely from your work, even if your presence would create a permanent establishment, unless you are a substantial shareholder. A foreign employer does not withhold Israeli tax, so the 0% is claimed on your annual return rather than through payroll, and the annual filing duty applies. US citizens still report the salary to the IRS; the Foreign Earned Income Exclusion, not the Foreign Tax Credit, is what keeps US tax off an income Israel taxes at 0%.
You file an online teum mas (tax coordination) with the Israel Tax Authority on Form 116ayin, attaching your teudat oleh or returning-resident certificate, the Population Authority entry-and-exit printout for 2016 to 2025 for you and your spouse, payslips or income confirmations from every payer, and the completed eligibility simulator, a spreadsheet the service page supplies. The in-year cap is 300,000 NIS for someone not required to file an annual return and 500,000 NIS for someone who is; the rest is claimed on Form 1301. The days test (no more than 90 days in Israel in each of 2016 to 2025, with limited exceptions) gates only this payroll route; failing it means the exemption can only be claimed on the annual return, where the assessing officer examines the centre-of-life evidence rather than granting it automatically.
No on all three. Bituach Leumi and health contributions are deducted under their own law regardless of the income tax exemption; health contributions alone are 3.23% up to 60% of the average wage and 5.17% above it, up to the 51,910 NIS monthly ceiling on which contributions stop. Dividends, interest, rent and capital gains are not earned income and stay taxed under the ordinary rules. Salary from a relative, or from an entity you or a relative hold 25% or more of, is exempt only up to 140,000 NIS a year, counted inside that year's general ceiling rather than added to it, and only on the annual return, never through a payroll tax coordination; a company you own outright is carved out, but a 30% holding is a relative and the cap applies.
Next step: put your landing date on the timeline
The Aliyah Financial Timeline turns a planned move month into the dated sequence of your first years in Israel, including the 90-day acclimation-year election and the point at which your first annual return comes into view. Enter the month you plan to move and read those dates against the 31 December 2026 cut-off and the 2028 and 2029 claw-back years above; the tool does not model the order's ceilings, which is what the tables on this page are for.