Israel unveils 0% tax rate for 2026’s immigrants and returning residents

New immigrants and returning residents arriving in 2026 will be offered a zero-percent income tax rate for their first two years after moving to Israel, under a dramatic new tax reform unveiled Thursday.

The reform, introduced as part of the 2026 state budget and announced in a ceremony at the offices of Nefesh B’Nefesh, an organization that supports immigration to Israel, is designed to attract skilled professionals, entrepreneurs and investors at a time of rising antisemitism abroad and shifting tax policies in Western countries such as Britain, the plan’s architects said.

“This is a Zionist and economic revolution,” Finance Minister Bezalel Smotrich said. “It’s worthwhile being a new immigrant.”

Under the plan, returning residents who lived abroad for 10 or more years and new immigrants who move to Israel in 2026 will pay no income tax in 2026 and 2027. Rates will gradually increase to 10% in 2028, 20% in 2029 and 30% in 2030 (based on tax brackets according to income). The rates will apply up to an annual income cap of NIS 1 million (about $305,000).

The new benefits will be added to existing incentives for immigrants, including a 10-year exemption on taxes from foreign income and various tax credits, the Finance Ministry said. The reform is currently set to apply only to people arriving in 2026.

“This is a data-based process that 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,” Immigration and Absorption Minister Ofir Sofer said.

The move joins a series of steps promoted by Smotrich and Sofer as part of a national effort to encourage immigration and facilitate immigrants’ integration into Israeli society and the economy.

Last month, the ministry launched a new initiative to work with Israeli companies to provide employment for immigrants as soon as they arrive in the country. Its goal is to strengthen Israel’s economic power even as it eases one of the most significant barriers to immigration.

In February, the ministry announced an NIS 170 million ($52 million) program to improve integration, along with a reform designed to speed up the licensing process for new immigrants to work in their professional fields. More recently, it launched a new government program offering incentives to attract successful Jews with in-demand skills to immigrate to Israel. Other initiatives, including expanding tax exemptions for immigrants who own businesses and offering personal assistance to potential immigrants throughout Europe, are also underway.

For every shekel invested in immigrants, Israel earns at least four in return, Immigration and Absorption Ministry Director General Avichai Kahana has noted.

Immigration inquiries have surged by hundreds of percentage points in the past two years, particularly from North America, Europe and the United Kingdom, amid rising antisemitism and global instability, the ministry has said.

Some 54,000 new immigrants have arrived in Israel since Hamas launched its war with Israel on October 7, 2023, according to ministry data.

“In most countries, people leave during a war, but in Israel, people come to help,” Sofer has said as he touts rising immigration numbers, even if the reality is somewhat more complicated. The number of Israelis who have left the country has also risen drastically in recent years. More than 125,000 Israeli citizens moved abroad between early 2022 and mid-2024, the country’s largest-ever loss of human capital in such a short period, according to a report presented last month to the Knesset’s Immigration and Absorption Committee.

The trend, widely attributed to political unrest and the Gaza war, is believed to be continuing in 2025.

Officials said they hoped the new tax relief will help attract high-earning professionals who can contribute to Israel’s innovation-driven economy.

They are also eyeing a tax on the wealthy that is being considered in the UK and that may accelerate a trend of wealthy people departing the country for other locations, as potentially encouraging immigration to Israel.

“Immigration is of Zionist, social, and economic importance to the State of Israel,” Sofer said. “It strengthens our social fabric, brings high-quality human capital, and directly contributes to growth, innovation, and economic development.”