Law for the Encouragement of Immigration to Israel and Return to It (Temporary Order), 5786-2026
4.8.2026
Law for the Encouragement of Immigration to Israel and Return to It (Temporary Order), 5786-2026
Aug 4, 2026
A new immigrant or a long-term returning resident who has started working in Israel may find that their personal-exertion income is exempt from tax, and not only the income left behind abroad. A new temporary order grants exactly that, and the Israel Tax Authority has issued detailed guidance for practitioners on how to claim the benefit during the year. It also contains a practical hurdle that is easy to miss. Without the output of a days-of-presence simulator, the request will not be processed at all.
On 2 August 2026 the Israel Tax Authority issued guidance for practitioners on the temporary order titled the Law for the Encouragement of Aliyah to Israel and Return to It, 5786-2026, which entered into force on 31 March 2026. To be clear at the outset: this is administrative guidance from the Authority explaining how to claim a benefit set out in the law, and it is neither new legislation in itself nor case law.
The main novelty is the direction of the relief. Rather than focusing on income earned outside Israel, as the veteran benefit tracks do, the temporary order exempts personal-exertion income produced in Israel, meaning salary, a business, or a vocation. The exemption applies to tax years 2026 to 2030, subject to the published ceilings. Passive income, such as interest, dividends, rent, or capital gains, is not included.
For practitioners: the benefit is focused on employment and business income produced in Israel while the individual is already a resident. It should be distinguished from the existing tracks that apply to foreign income.
Eligibility is intended for an individual who became an Israeli resident during the determining period, between 5 November 2025 and 31 December 2026, as a new immigrant or a long-term returning resident as defined in law. Alongside this, cumulative conditions are required. The center of life was moved to Israel during the determining period. The income is personal-exertion income only, a business, a vocation, or salary, produced in Israel while the individual was an Israeli resident, and not passive. The income is not attributed from a transparent entity in which the individual is a material shareholder, except for a full holding. In addition, within the tax coordination the income must not be from a relative as defined in section 88 of the Ordinance, while income from a relative is handled separately and at a reduced ceiling, as detailed below.
Beyond these, a days-of-presence examination applies. The benefit is granted only to an individual who actually moved the center of their life to Israel during the determining period, and the assessing officer will examine compliance with the days-of-presence conditions in Israel in the years preceding 2026, in accordance with Circular 7/2026, which sets out the eligibility conditions and the rules for realizing the benefit.
For practitioners: receiving an immigrant or returning-resident certificate is not enough. One must prove a genuine relocation of the center of life, and compliance with the days-of-presence conditions in the preceding years.
As a rule, full eligibility is examined and approved within the annual return. Even so, to enjoy the benefit already during the year, an advance request can be filed. An employee is entitled to request a tax coordination. The exempt income ceiling in the 2026 tax coordination is 500,000 shekels for a person required to file a return, and 300,000 shekels for a person who is not. A person whose income exceeds the ceiling in the tax coordination can claim the remainder within the annual return or a refund request. A self-employed person is entitled to request a reduction of the advance-payment rate.
Two important qualifications. Where the income is received from a relative, as defined in Circular 7/2026, the exempt ceiling is limited to 140,000 shekels only. And for a person who immigrated or returned during 2026, the exempt ceiling, both for the tax coordination and for computing the exempt income in the 2026 annual return, is calculated proportionally according to the date of arrival in Israel.
For practitioners: an early realization through tax coordination or a reduction of advances helps cash flow, but the ceiling is limited. The remainder is claimed in the annual return.
This is the practical point that is easy to miss. To ease the examination of compliance with the days-of-presence conditions, the Tax Authority developed a simulator that computes the days of presence in Israel over the set periods. The applicant must attach the simulator's computation output to the request. The Authority states expressly that without a simulator printout the request cannot be processed. In other words, this is a practical threshold condition, not a recommendation.
For practitioners: run the simulator and generate the full output before filing the request. A request without a simulator printout will not enter processing at all.
A request for the benefit in a tax coordination or a reduction of advances for the self-employed must include a set of documents. Form 116ע, fully filled out and signed. An immigrant certificate or a returning-resident certificate. A "Traveler Details" printout, detailing entries and exits, for the years 2016 to 2025, for the applicant and the spouse. Salary slips or income confirmations from all employers and payers. Documents supporting any additional requests for tax relief. A full simulator output for checking the days of presence. And, if needed, additional documents to prove the center of life in Israel.
For practitioners: the documentation is extensive, and includes ten years of entry and exit data for both spouses. It is worth gathering it in advance so as not to delay the request.
Where a condition is not met, the exemption cannot be approved within a tax coordination or a reduction of advances. Even so, a comprehensive and full eligibility examination can be conducted by filing an annual return. On the portion above the ceiling, the individual will be entitled to tax rates starting from the lowest bracket, and to credits and credit points according to their status.
For practitioners: a rejection at the advance stage is not the end of the road. The annual return allows a full examination of eligibility, and on income above the ceiling the ordinary tax rates and credits apply.
What is the benefit under the temporary order? An exemption from tax on personal-exertion income, salary, a business, or a vocation, produced in Israel, for new immigrants and long-term returning residents, for tax years 2026 to 2030, subject to the published ceilings.
Who is entitled to the exemption? An individual who became an Israeli resident between 5 November 2025 and 31 December 2026, as a new immigrant or a long-term returning resident, who moved the center of their life to Israel and meets the cumulative conditions and the days-of-presence conditions.
How is the exemption obtained during the year? An employee files a request for a tax coordination, and a self-employed person files a request to reduce the advance-payment rate. The remainder beyond the ceiling is claimed in the annual return.
What are the exempt ceilings in the 2026 tax coordination? 500,000 shekels for a person required to file a return, and 300,000 shekels for a person who is not. Income from a relative is limited to a ceiling of 140,000 shekels only. For a person who immigrated during 2026, the ceiling is calculated proportionally to the date of arrival.
Why is a simulator printout mandatory? The simulator computes the days of presence in Israel, which are a condition for eligibility. The Authority determined expressly that without a simulator printout the request cannot be processed.
What happens if the conditions are not met at the request stage? No exemption will be approved in a tax coordination or a reduction of advances, but a full eligibility examination can be conducted in the annual return.
The temporary order, the Law for the Encouragement of Aliyah to Israel and Return to It, grants new immigrants and long-term returning residents an exemption from tax on personal-exertion income produced in Israel, for the years 2026 to 2030. The benefit is intended for a person who became an Israeli resident during the determining period, and it is subject to cumulative conditions and a days-of-presence examination. It can be realized during the year, an employee through a tax coordination and a self-employed person through a reduction of advances, at ceilings of 500,000 or 300,000 shekels, and 140,000 shekels only for income from a relative. The central practical hurdle is the simulator printout, without which the request will not be processed, alongside extensive documentation of entries, exits, and income. A person who does not meet a condition at the advance stage can still be examined in full in the annual return. We note that this is Tax Authority guidance for realizing a benefit set out in law, and not legislation or case law.
Have you immigrated or returned to Israel, and want to make sure you are maximizing the exemption on your personal-exertion income?
Are you weighing whether to realize it during the year through a tax coordination, or to wait for the annual return?
KLF Law specializes in international taxation, taxation of new immigrants and returning residents, and tax litigation. We examine eligibility and the days of presence, build the documentary foundation including the simulator output, and make sure you pay only the tax you truly owe.
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About the author: Roy Kariv, senior attorney and tax advisor. Founder of KLF Law. Former prosecutor in the special cases unit at the Israel Tax Authority. More than ten years of experience in cross-border tax advisory, tax litigation, and representing taxpayers before the Supreme Court. Founder of ktAi, an AI platform for international taxation.
