Tax reporting puts potential immigrants under pressure

On January 1, 2026, the ten-year exemption granted to new immigrants and returning residents from reporting their income abroad will be eliminated. The exemption was issued in 2018 as part of the tax reform that became known as the Milchan Act. New immigrants were granted an exemption from taxes on and from reporting assets and income arising outside Israel for a period of ten years from the date on which they became residents of Israel. New legislation that will take effect on January 1 eliminates the reporting exemption, and tax experts are already starting to see the consequences.

“There is already a wave of new immigrants who plan to come to Israel before the end of the year,” the lawyer says. Yair Binyamini, partner at Binyamini & Partners, which specializes in Israeli tax law. “Since the summer, we have seen more people saying: ‘Maybe this is the right time to go to Israel’, but the war was still in the background, so some of them waited. Now that the war is over, they already have one leg here. And people with a connection to Israel who were anyway coming here for two or three months a year and with plans to immigrate to Israel ‘one day’ are putting these ideas into practice.”

circumstance. Benjamini says potential migrants are showing interest in aliyah (immigration) as soon as this year, despite the short time left to do so. “I have several clients who are on the fence, who are Jews from the United States who already have homes in Israel and some of whom have families here, sometimes children, and they always thought that at some point they would like to live in Israel, but they weren’t ready for that step. Now they realize that if they do that after January 1, they’ll have to report all of their exempt income abroad, so they’re taking Tips on how to get ahead this year.”

OECD warning

The law earned the nickname “Milchan’s Law” because Arnon Milchan was one of the main beneficiaries of the exemption extension in 2018, and Prime Minister Benjamin allegedly pushed for the exemption extension on his behalf. The charge against Netanyahu in Case No. 1000 revolves around extension.

Amendment No. 168 to the tax law was enacted in 2008 to encourage the flow of Jewish money into Israel, and in 2009-2010 several wealthy people living abroad, including the late Sami Ofer and his son Eyal, real estate tycoon Saul Zakai, technology entrepreneurs Arnon Katz, and Teddy Sagi, immigrated or returned to Israel.

Over the past decade, the Israel Tax Authority has tried to eliminate the tax and reporting exemption, or at least the reporting exemption, but has been met with a wall of opposition from many politicians. At the same time, the law came under intense international criticism, on the grounds that Israel served as a tax haven for illicit funds, and internal criticism as well, among other things from the State Comptroller, who wrote that the exemptions created the risk of attracting criminal elements to Israel.

Ultimately, the reporting exemption was scrapped after a warning from the OECD General Forum that Israel would be placed on a blacklist of countries that do not adhere to international transparency rules, and would be subject to economic sanctions if it did not stop providing tax havens and helping to hide assets from authorities in other countries.

The legislation passed in April 2024 contains two main changes regarding reporting of overseas income and property. It mandates reporting and provision of information on ownership rights in companies and trusts, and reporting and information on all worldwide assets and income of new immigrants and returning residents. As mentioned, the main advantage, which is a ten-year tax exemption, has not been cancelled.

“Although the tax benefits have not gone away, the idea of ​​reporting all foreign income to the IRS makes people nervous, especially the wealthy, because they think that when the IRS sees the size of their income, it will look for ways to tax part of it,” Benjamini says.

But there is a tax break, right?

“This is not entirely true. There are many interpretive questions regarding what the exemption applies to and what it does not apply to. The tax exemption is formulated in a seemingly wholesale manner, granting a ten-year tax exemption for all income arising outside Israel for a period of ten years, but when it comes to actually applying the definition, the question becomes more complex. For example, in the case of a person who has property in several companies, partnerships and business activities of various kinds. Types of types abroad: Whoever submits a tax return showing the high income that he considers to be exempt from tax, which gives the IRS an incentive to examine what is exempt and what is not.

Benjamini says that as a result of the reporting obligation, many disputes may arise with the IRS. “The Authority has an interest in narrowing the definition of ‘income arising from abroad’. Removing the exemption is a step that raises great concern for people who are considering coming to Israel.”

The Israel Tax Authority said in response: “Amendment No. 272 ​​to the Tax Law aims to enhance tax transparency and assist in the fight against illicit funds, avoiding the negative assessment of Israel by the Global Forum and the EU blacklisting of Israel. The provisions of the amendment will apply to anyone who becomes a resident of Israel as of January 1, 2026.”

Published by Globes, Israel Business News – en.globes.co.il – on October 22, 2025.

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