Major Tax Changes for Olim Beginning January 2026

News

7 May

Introduction to the New Reporting Framework

Starting January 1, 2026, significant changes will transform the tax reporting landscape for new immigrants (olim) and returning residents to Israel. This represents the most substantial modification to Israel's olim tax benefits since the landmark 2008 reform that established the current 10-year tax holiday system.

The core of the change is straightforward: while new olim will continue to enjoy exemption from Israeli taxation on their foreign income for 10 years, they will no longer be exempt from reporting these assets and income to the Israeli Tax Authority (ITA). This shift fundamentally alters the privacy component of Israel's olim benefits package while maintaining the financial advantages.

Detailed Reporting Requirements

The new requirements will be extensive and thorough. Olim arriving after January 1, 2026, will need to file annual tax returns disclosing:

All global financial assets (bank accounts, investment portfolios, cryptocurrency holdings)
Real estate holdings worldwide
Ownership interests in foreign companies and partnerships
Trust arrangements where they serve as settlors, beneficiaries, or trustees
Global income streams (even though they remain tax-exempt)
Pension arrangements outside Israel
Intellectual property rights and royalty streams

The level of detail required will be substantial. For bank accounts, disclosure will likely include account numbers, financial institutions, average balances, and interest earned. Investment holdings will require information about specific securities, purchase dates, acquisition costs, and current market values.

Form 150 Requirements

Form 150 plays a central role in the new reporting regime. This form, which has recently been revised and expanded by the Tax Authority, requires detailed disclosure of interests in foreign companies and partnerships. As of January 2026, new olim must submit this form as part of their annual tax returns.

The expanded Form 150 requires information about:

The legal structure of foreign entities
Ownership percentages and changes in ownership during the tax year
Income generated by these entities, even if not distributed
Business operations, including countries of operation and primary activities
Related party transactions
Corporate governance structures
Changes to company bylaws or partnership agreements

This represents a significant compliance burden, as the form must be completed for each foreign entity in which the oleh has an interest.

Foreign Company Accounting Requirements

Foreign companies controlled and managed by post-2026 olim will face new accounting standards requirements. These companies must:

Maintain accounting records according to Israeli Generally Accepted Accounting Principles (GAAP)
Prepare annual financial statements that conform to Israeli standards
Be prepared to submit these statements to the ITA upon request
Track and document related party transactions
Maintain documentation of transfer pricing methodologies
Keep detailed records of all significant business decisions

This represents a significant shift in compliance requirements, as many foreign companies operate under different accounting standards. The cost of converting accounting systems to meet Israeli requirements may be substantial.

Trust Implications

The impact on trusts is particularly significant. After January 2026:

Trusts with new olim as settlors, protectors, or beneficiaries lose reporting exemptions
Trustees must disclose all "controlling individuals" of the trust, including non-Israelis
The ITA will have visibility into trust assets, distributions, and beneficiaries
Foreign trusts with even one Israeli connection may trigger Israeli reporting obligations
Trust formation documents and amendments must be disclosed
Annual activities of the trust, including distributions and investments, must be reported

This represents a dramatic change in transparency for trust arrangements, which have traditionally provided privacy protections for wealth management. Foreign trustees may need to become familiar with Israeli reporting requirements, which could be challenging.

Grandfathering Provisions

The changes include important grandfathering provisions. Olim who established Israeli residency before January 1, 2026, will continue to benefit from both tax and reporting exemptions for the remainder of their 10-year benefit period. For example:

An oleh who arrived in 2020 will continue to enjoy complete exemption from both tax and reporting until 2030
An oleh who arrives in December 2025 will maintain full exemptions until December 2035
Only those arriving January 1, 2026, or later will face the new reporting regime

This creates a clear deadline for those considering aliyah who wish to benefit from the full privacy protections currently in place.

Timing Considerations and Planning Opportunities

The timing of aliyah has now become a critical tax planning consideration. Some specific concerns include:

Late 2025 arrivals may be scrutinized by the Tax Authority, which might attempt to classify borderline cases as 2026 arrivals
Documentation proving 2025 residency status will become extremely important
Establishing clear residency before the end of 2025 may require physical presence in Israel, appropriate housing arrangements, and integration steps
Pre-aliyah restructuring of assets and business interests should be considered well before the move
Trust arrangements may need to be reviewed and potentially modified before immigration

Tax professionals are advising those considering aliyah to begin planning at least 12-18 months before their intended immigration date to ensure proper structuring of assets and clear establishment of residency timing.

Implementation Timeline

While the law changes take effect January 1, 2026, the actual implementation will follow this timeline:

The new reporting requirements will first apply to the 2026 tax year
The first tax returns under the new system will be filed in 2027
The ITA is expected to release detailed guidance and forms during 2025
Transitional rules may be announced to address specific situations
Full enforcement is expected to begin with returns filed in 2027

This gives potential olim and their advisors some time to prepare, though the fundamental changes to the system are already established in law.

Practical Implications

The practical implications of these changes are significant for new olim:

Increased administrative burden and compliance costs
Reduced privacy for global financial affairs
Potential need for accountants familiar with both Israeli tax law and the tax systems of their origin countries
Strategic decisions about asset location and structure before immigration
Documentation requirements for assets acquired before aliyah
Planning for eventual exit from the 10-year benefit period
Coordination between Israeli tax counsel and foreign advisors

Those used to tax systems with territorial taxation or limited reporting requirements may find the new global disclosure obligations particularly burdensome.

Impact on Different Asset Classes

Different types of assets will face varying levels of complexity under the new regime:

Real Estate: Foreign real estate must be reported, including acquisition dates, costs, current values, rental income, and financing arrangements. While the income remains tax-exempt for 10 years, the reporting burden increases significantly.

Business Interests: Ownership in foreign businesses will require detailed disclosure, potentially including operational data, financial statements, and governance information. The management and control structure will need careful documentation.

Financial Investments: Investment portfolios will require disclosure of individual holdings, acquisition dates, and current values. This could be particularly cumbersome for active traders or those with complex investment structures.

Trusts and Foundations: These arrangements face the most significant changes, with beneficial ownership information now requiring disclosure even when the trust is established in jurisdictions with strong privacy protections.

Reasons Behind the Changes

The changes stem from Israel's compliance with international tax transparency standards:

The OECD's Global Forum on Transparency and Exchange of Information for Tax Purposes had rated Israel as only "Partially Compliant"
The lack of reporting for olim's foreign income created a blind spot in Israel's information exchange capabilities
The Financial Action Task Force expressed concerns about potential money laundering risks
EU threatened potential economic sanctions or blacklisting if transparency wasn't improved
Global pressure for increased financial transparency has intensified in recent years

Israel's changes align with global trends toward greater tax transparency, automatic exchange of financial information, and reduced financial privacy.

Strategic Planning Considerations

For those considering aliyah, some strategic considerations include:

Accelerating immigration plans to benefit from the grandfathering provisions
Restructuring asset ownership before immigration
Evaluating trust arrangements and potentially modifying them
Simplifying financial affairs where possible to reduce reporting burdens
Ensuring assets acquired before aliyah are properly documented
Planning for the eventual end of the 10-year benefit period
Coordinating with tax advisors in both Israel and the country of origin

Early planning has become even more important given these changes.

Conclusion

While Israel's olim tax benefits will remain financially attractive after January 1, 2026, the loss of reporting exemptions represents a significant reduction in privacy protection. Potential immigrants need to carefully consider the implications of these changes and potentially adjust their timing and asset structures accordingly.

The clear grandfathering provisions create a bright-line test: arrive before January 1, 2026, to maintain both tax and reporting exemptions for 10 years; arrive after, and maintain only the tax exemptions while facing comprehensive reporting requirements.

For many considering aliyah, particularly those with complex financial affairs, consulting with tax professionals who specialize in Israeli and international taxation has become even more essential to navigate these important changes successfully.