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Aliyah: the secret to living in Israel with a 10-year tax exemption

Israel is well known for its thriving economy, its religion, its extensive beaches, its lively nightlife and, of course, its vast historical and cultural heritage.

However, many are unaware of its role as a tax haven. We are talking about Aliyah or Aliyah, a Hebrew term that could be translated as “elevation” or “ascension”.

Although the income tax in Israel for ordinary people and nationals of the country is not at all attractive (and can even reach a rate of 50%), thanks to the aforementioned Aliyah, returned Hebrews or nationals, as well as new immigrants, can obtain an attractive 0% tax rate?

An emigrant arriving in Israel under the Aliyah will enjoy extensive tax benefits for 10 years. He will be exempt from paying taxes and during the same period he will not have to declare the origin of his assets and income.

It is therefore a regime of total tax exemption that also grants a privacy that has no point of comparison with Western standards.

If this regime is so beneficial, why is so little known about it?

As a Spanish or Latin American national, our users tend to think in terms of proximity, affinity (Andorra and Portugal) or in terms of popularity in networks (Emirates, Qatar, Malta, etc.), and Latin history and traditions are very little linked to Judaism or the state of Israel… so in general terms Aliyah is a real unknown.

Nevertheless, it is extremely popular among Russians and French.

A clear example is Chelsea owner Roman Abramovich, who abandoned his non-dom profit in the UK for the superb Aliyah regime, much more beneficial from a tax point of view.

Where does this regime come from?

The tax aspect of the Aliyah regime emerged in Israel in 2008 as an amendment to the country’s ordinary taxation and is known as the “Amendment 168 to the Income tax Ordinance” or “Milchan law” (the mogul for whom it was created).

Initially, this amendment was intended to favor the arrival of new Jews to Israel (Aliyah), allowing them to enjoy a 10-year exemption on income earned outside Israel.

This measure and tax exemption was designed with the simple intention of helping the new Jews settled in Israel so that they would not have to go through economic hardships in their first years of difficult adaptation to the country.

However, the reality was quite different…. And the regime has served mainly to attract millionaires.

To whom is this regime granted?

Such tax exemption covers income that originates outside Israel, and access to it requires the status of “first resident in Israel” (regardless of Jewish origin) or “returned immigrant”.

And how does one get the status of “first resident in Israel”?

In the verbatim words of our collaborators in Israel “The 10-year exemption is for every Israeli resident who comes to live in the country for the first time, without any relation to it as a Jew or not. However, non-Jews will probably have difficulties in becoming residents from the perspective of Hebrew immigration law.”

First-time resident status in Israel, under strict scrutiny by the immigration department, is granted to:

  • “Oleh – Hadash” or new immigrants to the country. This status is granted to Jews, people with Jewish roots (up to third generation), Zionists or people with close ties to Israel. But in reality, this beneficial regime is available to anyone willing to live in Israel? and more than one non-Jew is enjoying this regime (e.g. millionaire James Packer).
  • Other notable residents. Under Israel’s strict immigration system, and with proper counseling, new residency in Israel can be granted to people who are going to undertake favorable business ventures for the country, do skilled work, or have a certain Zionist affinity.

At this point the reader may wonder if it is worth all the effort to be able to live and tax in Israel… but the benefits granted by this regime are very broad and virtually unmatched and unparalleled in the world at the level of low taxation and opacity.

What benefits does it provide?

  • A 10-year exemption for income earned outside Israel.
  • This foreign income includes interest, royalties, dividends and capital gains from foreign sources and income from freelance work performed for the benefit of clients not located in Israel.
  • A tax residency certificate is granted to the beneficiaries thereof.
  • An exemption from reporting or informing your income for 10 years to the Israeli tax authorities.
  • Ability to obtain an Israeli passport after a certain period of time.
  • To be able to operate offshore in countries with no and/or low taxation under this kind of “tax ruling“. I.e. 10 years exclusion from the definition as a resident of an Israeli company (via effective seat of management) for companies established abroad and owned by an “Oleh” or new immigrant. For example, one could operate from Bahamas or BVI (with 0% taxation) without the existing Israeli CFC rules applying.

Who do we recommend it to?

The Aliyah is undoubtedly one of the most beneficial tax regimes on the planet, not because of its tax attractiveness but because of the little scrutiny by which the authority subjects its beneficiary. However, this regime is not available to everyone.

From Relocate&Save we only recommend applying for this regime to those who have Jewish ancestors (third generation), links with oppressed Jewish peoples (Sephardic), Zionist affinity or large businesses that may be of interest to the State of Israel.

This regime has been very attractive to Russians and French in recent years, but very little exploited by the Jewish community present in Latin America (Venezuela, Chile, Argentina, etc.) and Spain, currently threatened by the rise of populism and the Bolivarian left.

Which are the best tax destinations today?

If you are seriously interested in changing your tax residence, we recommend you to download for free and read our updated report “The top three tax destinations right now.”

Picture of Andreu Capmajó
Andreu Capmajó

Tax director

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