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Israel recalls citizens living abroad
The Israeli government decides to encourage the return of citizens who have left the country.
When a person leaves Israel for a certain period of time, he or she ceases to be considered an "Israeli tax resident".
These people are referred to by the Israeli tax authorities as "returning citizens".
Who is considered a returning citizen of Israel?
A returning citizen must have lived abroad for at least 6 years.
If it meets this criterion, it will benefit from a number of tax advantages.
These benefits will depend on the length of time the returning citizen has lived outside Israel. These periods are divided into 2 categories:
- More than 10 years abroad.
- Stay abroad between 6 and 10 years.
If you have been outside Israel for less than 6 years, it may be better to postpone your return date.
Citizens who have left Israel for less than 6 years are not considered returning citizens.
As a result, the many tax benefits to which a returning citizen is entitled are not available to them.
So if you're planning to return to Israel after a stay abroad, we recommend that you consult us beforehand.
In some cases, you can save several thousand Shekels.
As the French saying goes: un homme averti en vaut deux.
What are the tax advantages for a returning citizen?
If the citizen has lived abroad for between 6 and 10 years
- Tax exemption for 5 years following the date of return, on passive income from property abroad. Provided that the assets were purchased during the period in which the citizen was not in Israel.
For example: If you own real estate in France, any rental income from this property is fully tax-exempt for 5 years from the date of your return to Israel. - Tax exemption for 5 years on capital gains realized on assets located abroad. Provided that the property was purchased during the period in which the citizen was not in Israel.
For example: if you sell a property in France, the capital gain will be exempt in Israel. So you won't need to justify the source of the money received as a result of the capital gain.
- Exemption on dividends and interest for certain stock market securities held abroad.
This exemption must meet certain well-defined criteria. Please contact us for further information on this particular point.
If the citizen has lived abroad for more than 10 years
A returning citizen who has lived abroad for more than 10 years will enjoy the same tax benefits as an Ole Hadash.
Here's a brief summary of these advantages. (For more information, see the article in the link at the end of this paragraph):
- Exemption on active income (salaries, business income) from an activity carried out abroad. This exemption will be granted for 10 years from the date of your return.
- Exemption on capital gains realized on the sale of assets located abroad. This exemption will apply even if the goods were purchased within 10 years of the date of return.
- Your foreign pension, received in Israel, will be tax-free for 10 years from the date of your return. After these 10 years, the amount of taxation cannot exceed the amount you would have paid in the country paying your pension.
- If this applies to you, please contact us to declare your foreign pension.
- Tax-free for 20 years, on interest earned on stock market securities indexed to a foreign currency (provided that the investment in the stock market securities or savings plan came from funds in the investor's possession prior to the date of return to Israel. Provided also that the investments were made in Israeli banks).
Read also: What are the tax benefits for an Olé Hadash?
Who can benefit from these advantages?
Anyone who has ceased to be an Israeli tax resident since 01/01/2009, and who decides to return to the country after spending at least 6 years abroad.
For people who ceased to be residents before this date, please contact us to find out about your rights.
We remind you that you can claim back the overpayment made by the tax authorities over a period of 7 years, retroactively.
