Israeli Tax After the 10-Year Exemption Ends: What Changes in Year 11

This guide is about the moment the benefit ends. For the year-by-year checklist while it is still running, see the 10-year exemption planning checklist.

What changes on the end date

• Worldwide taxation. Foreign dividends, interest, rent, pensions and business income become taxable in Israel.
• Gains. Disposals of foreign assets after the end date are taxable, subject to apportionment for assets held during the exempt years.
• Reporting. Foreign income and assets go into the annual return. (Residents from 2026 already report during the exemption.)
• Foreign tax credit. Tax paid abroad becomes relevant as a credit against Israeli tax on the same income.

Gains on assets held before the end date

For an asset bought before or during the exempt period and sold afterwards, Israeli law generally splits the real gain on a linear (time-based) basis: the portion attributable to the exempt period can remain exempt, the rest is taxed. Conditions and the method matter, especially for securities and assets with several acquisition dates. Get a calculation before deciding whether to sell before or after the end date.

Moves to make in years 8 to 10

1. Review which assets have large unrealized gains and model selling before vs. after the end date.
2. Rebalance or reset cost bases where your other countries' tax (for US citizens, US tax) allows it at reasonable cost.
3. Review foreign companies and trusts — rules on controlled foreign companies and trusts can bite once exempt status ends.
4. Decide how to draw pensions and annuities after the end date.
5. Collect statements showing values on the end date for future apportionment.
6. If you plan to leave Israel, consider timing against Israeli exit tax rules.

US citizens

For US citizens, the end of the Israeli exemption often reduces the overall burden on some income: Israeli tax paid can now generate US foreign tax credits. The interaction differs by income type — see US expat tax in Israel.

Sources

• Income Tax Ordinance [New Version], Section 14 and related apportionment provisions.
• Israel Tax Authority — guidance for new immigrants and veteran returning residents (gov.il).