Your French Retraite Paid Into an Israeli Account: Who Taxes It

Two French retirees on the same Netanya street, two different answers

A French pension paid to a resident of Israel is split by the France-Israel treaty on one line: pensions for service to the French state stay taxable in France, and everything else is taxable only in Israel¹. Two retired French olim on the same street therefore get opposite answers, and the difference is your former employer, not your income.

This is the part nobody warns you about at the תעודת עולה (teudat oleh) counter. A lifelong Israeli never meets it, because a lifelong Israeli has no French caisse de retraite deducting money before the payment leaves France. You do, and the deduction starts on the first payment after you land unless you have already done something about it.

Which treaty article decides your pension?

Article 18 is the default and Article 19(2) is the exception. Article 18 says that pensions, life annuities and similar payments made to a resident of one state are taxable only in that state, subject to Article 19(2)¹. Article 19(2) then carves out pensions paid by a contracting state, one of its local authorities, or one of their public-law bodies, for services rendered to that state: those are taxable only in the paying state¹.

The carve-out has an escape hatch, and it is the sentence French olim misread. Article 19(2)(b) sends the pension back to Israel only if you are resident in Israel and hold Israeli nationality without at the same time holding French nationality¹. The test is what you hold, not how you came to hold it: unless you have actually given up French nationality, the escape hatch stays shut. The French tax administration states the same rule in its own country sheet for residents of Israel, which lists French public remuneration and pensions among the income you must declare in France unless you hold Israeli nationality and not French nationality³.

One more branch is worth knowing, because it catches people who assume "I worked for the state" settles it. Article 19(3) sends remuneration and pensions for services rendered in the framework of an industrial or commercial activity carried on by the state, a local authority or a public-law body back to Article 18¹. A career in a state-run commercial business is not the same as a career in the administration. The Multilateral Convention that modified the treaty left Articles 18 and 19 unchanged².

The French side: what is withheld, and how you stop it

France applies a specific non-resident withholding to pensions, taken by the caisse de retraite before the money leaves. A 10% allowance comes off first, and the remainder runs through three bands. For 2025 income those bands are 0% below 17,122 EUR, 12% between 17,122 EUR and 49,667 EUR, and 20% above 49,667 EUR^°4. The 0% and 12% bands are final: that slice is not folded back into your French income-tax calculation. Only the 20% slice is⁴.

Two consequences follow, and they run in opposite directions. If the treaty gives your pension to France, the withholding is doing its job and a modest pension may be fully settled by it. If the treaty gives your pension to Israel, every euro withheld is money France was never entitled to, and getting it back is slower than never losing it.

The instrument that stops the withholding is the residence certificate, French form 5000. It is the document that lets treaty treatment be applied to French-source income. You complete the first three boxes, the foreign tax administration completes box IV, and the paying institution completes box V⁵. Note who has to sign box IV: the Israel Tax Authority. That is a second party on a timetable you do not control, and it is why this belongs in your first weeks, not in your first refund claim.

There is a specifically oleh trap sitting under that signature. If you elected the acclimation year, you are not treated as an Israeli resident for Income Tax Ordinance purposes until it ends, and that year still counts inside your ten¹⁰. An Israeli tax administration cannot certify you as an Israeli tax resident for a period in which, by your own election, you are not one. Sequence the acclimation-year decision and the form 5000 request together, not one after the other by accident.

One relief worth knowing: the French social levies on investment income do not follow you onto your pension. For a non-resident, CSG, CRDS and the solidarity levy apply to French property income and property gains⁶. Contributions taken by a caisse de retraite on a pension are a separate matter, levied under the Social Security Code rather than the tax code, and any dispute about them goes to the caisse rather than to the tax office⁶. That distinction also explains why your French health entitlement and your French tax position move independently: the treaty is a tax instrument, and the taxes it covers are listed in its Article 2, which names income tax, corporation tax, the payroll tax and the wealth tax on the French side, and the Income Tax Ordinance and related laws on the Israeli side¹. Social insurance is on neither list.

The Israeli side: the ten-year window, then year eleven

For your first ten years as a new resident, Israel exempts income sourced outside Israel, and a foreign pension is squarely inside that. The Israel Tax Authority describes the relief as a broad, uniform exemption covering all income produced or accrued outside Israel for ten years from aliyah, active and passive alike⁸. The Ministry of Aliyah and Integration confirms that the ten-year foreign-income exemption survives the newer reform package⁹.

Exempt from tax is not the same as exempt from filing. The relief as originally legislated was framed as an exemption from tax and from reporting on foreign assets and income⁸, but the two limbs are separate and have been legislated on separately since. Confirm the reporting position for your own aliyah year with the Israel Tax Authority rather than assuming the tax exemption settles it, because a first filing built on the wrong assumption is expensive to unwind.

Year eleven is where French olim are most often caught flat-footed, and where an unusually generous Israeli rule lands. Once the exemption lapses, an ordinary Israeli pension for work performed abroad is taxable in Israel, but the tax rate is capped: it may not exceed the rate you would have paid in the country paying the pension had you stayed resident there¹⁰. In plain terms, on that pension Israel does not charge you more than France would have. The ceiling is written around a pension arising from work abroad, which is why a life annuity bought out of personal savings is a different conversation from an occupational pension.

Why your contributions do not follow your tax exemption

Because they are levied under a different law. Israeli national and health insurance contributions sit under the National Insurance Law, not the Income Tax Ordinance, and the treaty covers income taxes only¹. Every Israeli resident aged 18 and over pays health insurance contributions, calculated from income from work and from other sources and from the status Bituach Leumi assigns you¹¹.

For someone who is neither employed nor self-employed, the published table charges nothing on the first NIS 3,442^° of monthly income not from work, then a combined 12.09% on the share up to NIS 7,703^° and 12.17% above it¹². A person with no income at all pays the minimum, currently NIS 266 per month^° across both contributions¹². Bituach Leumi decides how a specific foreign pension is classified for this purpose, so ask your branch in writing rather than inferring it from your tax result.

The six-month new-immigrant health exemption is the one most French retirees assume covers them and it usually does not. It applies to an oleh with no income, or income below NIS 688^° a month, for six months from the aliyah date, extendable to twelve if the Ministry of Aliyah and Integration is paying you subsistence benefits¹¹. A pension of a few thousand shekels a month clears that threshold on day one.

A worked example: two neighbours, one street

Claude and Michele each receive 2,400 EUR a month, 28,800 EUR a year. Both made aliyah last year, both kept their French passports, and both are inside the ten-year window. At the Bank of Israel representative rate of 3.4653 shekels to the euro¹⁴, that is roughly NIS 8,317 a month.

Claude retired from the French public administration. Article 19(2)(a) gives his pension to France, and his French nationality closes the escape hatch¹. France applies the 10% allowance, leaving 25,920 EUR, taxes nothing on the first 17,122 EUR, and takes 12% of the remaining 8,798 EUR, about 1,056 EUR a year⁴. Israel does not tax the pension at all, in year three or in year thirty.

Michele retired from a private-sector job. Article 18 gives her pension to Israel alone¹. Once her caisse holds a certified form 5000, French withholding stops⁵, and inside the ten-year window Israel exempts the income⁸. Her income-tax bill on that pension is zero in both countries. Her Israeli contributions are not: on NIS 8,317 of monthly income not from work, the published table exempts the first NIS 3,442 and charges 12.09% on the remaining NIS 4,875, about NIS 589 a month or roughly NIS 7,073 a year¹².

Two lessons sit in that pair. Michele's zero income tax is not a zero bill, and Claude's French tax bill does not exempt him from the Israeli contribution question on the same money. And if Michele had not filed her certificate before the first payment, the French withholding would have been taken from a pension France had no right to tax, and she would have spent the year chasing it back.

If you also hold a US passport

A France-Israel treaty binds France and Israel. It does nothing for a US citizen, who files a US return on worldwide income regardless of where they live and regardless of what any third-country treaty says. Dual French-American olim are not rare, and the two systems have to be read together rather than one behind the other.

This article is about where a pension income stream is taxed. It discusses no pooled investment vehicle, so PFIC does not arise on this page. It arises the moment a US-citizen oleh puts money into a non-US fund, which is a separate subject and a serious one. Meidahon covers PFIC for US-citizen olim in its own article.

What French olim get wrong

• Treating "pension" as one category. Article 18 and Article 19(2) point in opposite directions, and which one applies depends on who your employer was, not on how the payment reaches you¹.
• Assuming Israeli citizenship moves a public pension. It moves it only if you hold Israeli nationality and not French nationality. Holding both leaves the pension in France¹.
• Waiting for the first over-withholding. The residence certificate needs a signature from the Israel Tax Authority in box IV before the caisse can act on it⁵. Starting after the first payment means the certificate and your refund claim race each other.
• Reading the ten-year exemption as a permanent answer. It ends. After it ends, an ordinary foreign pension is Israeli-taxable, with the rate capped at the French rate¹⁰.
• Assuming an income-tax exemption is an exemption from everything. The treaty lists the taxes it covers and social insurance is not among them¹, so Bituach Leumi contributions are decided on their own terms¹².
• Budgeting in euros. Your pension is fixed in euros while your rent, ארנונה (arnona) (municipal property tax) and groceries are in shekels. The exchange rate moves the real value of an unchanged pension every month, and the Bank of Israel publishes the representative rate on every business day¹⁴.

A French pension paid to a resident of Israel is allocated by the France-Israel treaty of 31 July 1995 in two different places. Article 18 gives pensions, life annuities and similar payments to the country of residence, so a state old-age pension, a private occupational pension and a personal life annuity are taxable only in Israel. Article 19(2) carves out pensions paid by the French state, a local authority or a public-law body for services rendered to them, and keeps those taxable only in France unless you hold Israeli nationality without also holding French nationality. French pension payers apply a non-resident withholding after a 10% allowance at 0%, 12% and 20% bands, and the way to stop it on a pension the treaty gives to Israel is a residence certificate on form 5000 with box IV certified by the Israel Tax Authority, filed before the first payment rather than after the first over-withholding. Inside your first ten years Israel exempts foreign-source income including pensions; after year ten the pension becomes taxable in Israel at a rate capped at what France would have charged. National and health insurance contributions are levied under a separate Israeli law that the treaty does not cover.