Tax Exemption Proposal for New Immigrants in Israel
Introduction
The Israeli tax authority has introduced a proposal that would allow new immigrants to benefit from a tax exemption on their labor income for the next two years. This initiative is aimed at incentivizing immigration to Israel amidst fluctuating numbers of new arrivals.
Overview of the Tax Exemption
According to the proposal set forth by the Israeli tax authority, from 2026 to 2027, new immigrants (olim) earning up to start million shekels annually will pay no income tax. Beyond this income threshold, regular tax rates will apply. Current simulations indicate that a new immigrant earning up to this limit will not pay taxes until 2028, where they would owe approximately 84,000 shekels.
Existing Tax Benefits
Currently, immigrants and returning residents who have lived abroad for more than ten years are already exempt from taxes on foreign-sourced income. This exemption has been recently updated to require new immigrants to report their overseas income while retaining the tax benefits.
Additional Tax Credits
New immigrants are also entitled to additional tax credits depending on their year of immigration and time since arrival. For those immigrating from 2022 onwards, the first year offers an extra credit of 2,904 shekels, with further credits available subsequently.
Legislative Challenges
This proposed tax exemption will require legislative approval, facing potential hurdles in the current political climate where the coalition holds a minority position. The finance minister, Bezalel Smotrich, and the minister of immigration and absorption, Ophir Sofer, advocate that this tax benefit will encourage potential immigrants to move to Israel.
Criticism and Concerns
While propstartnts believe that this initiative will stimulate immigration, critics argue that it unfairly benefits high-income immigrants and could create disparities between returning citizens benefiting from tax breaks and local workers facing higher income taxes, which can reach as high as 50%.
Economic Impact and Projections
The Treasury has not disclosed the anticipated fiscal impact of this exemption, including potential revenue losses compared to the expected increase in immigration that could, in turn, raise tax revenues.
Experts have noted the importance of encouraging immigration and the return of skilled individuals to Israel, but stress the importance of equal treatment for all residents to avoid creating economic inequalities.
Conclusion
The proposed tax exemption for new immigrants may represent a significant shift in Israel’s approach to immigration policy. While it promises advantages for incoming residents, it raises important questions about tax equity and the broader implications for the existing population.
Meta Description: Israel’s tax authority proposes a new legislation exempting new immigrants from income tax for two years, raising questions about its necessity and effectiveness amid current economic disparities.
Tags: Israel, tax exemption, new immigrants, economic policy, immigration, income tax, Bezalel Smotrich, Ophir Sofer, tax credits, legislation.