Finance Minister Promotes Tax Incentives for New Immigrants to Israel
Overview of Proposed Tax Exemptions
Finance Minister Bezalel Smotrich announced at a Tax Advisors Association conference that he plans to encourage immigration to Israel by extending tax exemptions for new immigrants to include domestic earnings. Currently, new immigrants benefit from a ten-year tax exemption on foreign income but do not receive similar benefits on income earned in Israel.
“We will encourage immigration through dramatic tax benefits, which will bring not only human capital but also substantial economic resources,” said Smotrich. “The goal is for new immigrants to bring their mstarty here, allowing our economy to benefit.”
Changes to Income Reporting Regulations
Starting January 1, 2026, tax exemptions for reporting foreign income for new immigrants and returning residents will be repealed. This exemption, introduced in the 2018 tax reform dubbed “Milchan Law,” allowed new immigrants and returning residents to both avoid taxes and reporting obligations on foreign assets and income for a decade after their immigration to Israel.
Recent legislative changes have already removed exemption from reporting foreign income, contrary to the position of tax authority leaders who have advocated for the complete cancellation of tax exemptions for new immigrants. However, officials within the tax authority expressed support for Smotrich’s initiative to temporarily exempt new immigrants from local income taxes during a defined period until the end of 2026. This approach would serve to attract Jewish immigrants from Western countries, particularly in light of rising antisemitism.
Potential Tax Rate Adjustments
In addition to the proposed tax exemptions, Smotrich revealed plans for possible tax cuts but did not provide specific details. Speculation within the Finance Ministry suggests that a key reform could be the cancellation of the freeze on income tax brackets that has been in place until 2027. Ending this freeze in 2026 would enable some workers to move to lower tax brackets, effectively reducing their income tax burden.
Affordable Housing Initiative
Smotrich also referenced a housing plan approved by the government, anticipated to increase the housing supply by tens of thousands of units. He advised prospective homebuyers not to rush into purchases, urging them to negotiate with developers. “Don’t let the developers raise prstarts arbitrarily. There will be no shortage of supply in the coming years, so wait for the right moment to buy,” he stated.
Financial Budget Considerations
Addressing the security budget, Smotrich emphasized the need for the defense system to become more efficient and adhere to reasonable budget limits. He noted that while the budget would remain higher than pre-war levels, it cannot continue to expand indefinitely as it has in the past two years without limits.
Response from the Tax Authority
In response to Smotrich’s announcements, Tax Authority Director Shai Aharonovitch expressed surprise at the proposal for tax exemptions on local income but acknowledged the timeliness of such a plan. “This is an opportunity to encourage our brothers in France, Canada, and the United States to come to Israel and join this wonderful endeavor,” he remarked. He highlighted the atmosphere of rising antisemitism in Western countries as a pivotal driver for potentially affluent Jews considering making Aliyah.
A meeting has been scheduled for tomorrow between Aharonovitch and Smotrich to discuss the details further. He noted the importance of understanding the minister’s intentions while expressing willingness to support a targeted, time-bound exemption initiative.
This update encapsulates various financial policies envisaged by Finance Minister Bezalel Smotrich to enhance economic growth and support immigration to Israel, set against the backdrop of socio-political challenges faced by Jewish communities worldwide.