Smotrich plans 0% income tax for new immigrants

Minister of Finance Bezalel Smotrich and Minister of Aliyah and Integration Ofir Sofer have presented a new initiative in which new immigrants and returning residents that immigrate to Israel in 2026 will enjoy major tax benefits.

The tax benefit will be graduated with a zero tax rate applying to immigrants and returning residents in 2026 and 2027 on their income in Israel, with the tax rate gradually increasing to 30% until 2030. Currently, there is a tax exemption for new immigrants on income earned abroad for 10 years, under the law known as the “Milchan Law,” but not on income earned in Israel.

This is an initiative that the Minister of Finance first revealed at a conference of the Tax Advisors Association two weeks ago, surprising Ministry of Finance and Israel Tax Authority senior officials when he said that he intends to encourage immigration to Israel by exempting new immigrants from tax on income earned in Israel. Smotrich then met with Tax Authority chief Shay Aharonovich to formulate details of the new tax break.

The tax reform for new immigrants will be approved as part of the state budget Smotrich presented this week, as part of which major tax benefits will be granted to new immigrants and returning residents, including the following tax rates: 2026 – 0%. 2027 – 0%; 2028 – 10%; 2029 – 20%; 2030 – 30%.

An income ceiling has been added to the reform, and it has been set that it would apply up to a ceiling of NIS 1 million per year. Above this ceiling, the regular tax rates will be paid according to the marginal tax brackets.

The move is one of a series of measures promoted by the Minister of Finance and the Minister of Aliyah and Integration, as part of a national effort to encourage immigration and integration into Israeli society and the economy.

The Ministry of Finance explains the benefit is needed to encourage immigration to Israel due to the rise in anti-Semitism around the world and changes in tax policy in Western countries like the UK. According to the Ministry of Finance, the program will strengthen the Israeli economy by encouraging the immigration of Jewish professionals, entrepreneurs, and businesspeople from around the world, and will facilitate their integration into Israeli society and the economy.

Alongside this benefit, new immigrants will continue to be eligible for benefits currently available to new immigrants and returning residents, such as tax exemption for income generated outside of Israel for 10 years from the date they become residents of Israel and tax credits.

On January 1, 2026, the exemption for new immigrants and returning residents from reporting their income abroad for 10 years will be abolished.

Smotrich proposes expanding tax break for new immigrants

The exemption became law in 2018, as part of the tax reform called the “Milchan Law” and granted new immigrants and returning residents an exemption from both paying taxes and reporting on assets and income originating outside of Israel for 10 years after becoming residents of Israel. However, as part of new legislation that will come into effect at the beginning of this year, the exemption from reporting has been abolished.

2026 will see revolution in immigration

Smotrich spoke about the reform at an event held in collaboration with the Nefesh B’Nefesh, attended by Sofer and Aharonovich. He said, “Zionism has always rested on three things – Settlement, security and immigration. We have invested heavily in security in the last two years, and with God’s help the State of Israel is now in a different place. In settlement, we are creating a revolution – Judea and Samaria, South and North – Negev, Galilee and Golan. 2026 will be a year of revolution in immigration. Not as a slogan but as a practical work plan. I call on the Jews in the Diaspora and Israelis – come home.”

Sofer added, “In the last three years, we have been changing and strengthening the infrastructure for immigration and integration. Today, we are adding a significant and important layer to the national movement to encourage immigration. This is a professional, wide-ranging and data-based move, which aims to ensure optimal integration for new immigrants, create a real opportunity for them to integrate into Israeli society, and at the same time contribute to the growth of the Israeli economy.”

Published by Globes, Israel business news – en.globes.co.il – on November 6, 2025.

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