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Israeli Knesset Approves Ten-Year Tax Exemption for New Immigrantsby Nissan Ratzlav-Katz Courtesy of http://www.israelnationalnews.com September 9, 1908 New immigrants to Israel and returning expatriates will enjoy a ten-year exemption from Israeli taxes on foreign assets and on any income generated abroad. This is just one of the key measures passed unanimously by the Israeli Knesset in September, 2008, when it voted into law a far-reaching tax reform bill aimed at promoting immigration. The unprecedented tax breaks apply to all new immigrants and returning Israelis who arrived in the country as of January 1, 2007.
In addition to a ten-year tax exemption for all income generated outside Israel - including salaries, passive income and capital gains - the new law includes the following reforms to the Tax Code:
Extending Tax Exemptions to Returning Expatriates
Absorption Track
According to Aflalo, the new tax reforms remove a significant stumbling
block for immigrants and returning CPA Baruch Grossman, whose Modiin-based firm, Grossman & Co., specializes in American-Israeli tax issues, agrees: "Such tax exemptions are definitely an effective means of promoting immigration to Israel." In fact, with proper tax planning, "there is a real possibility for people... to make Aliyah and live out their lives in a Holy Land Tax Haven," he added. However, Grossman warned, "That tax haven can easily become a 'honey trap' for the unprepared immigrant." There is the likelihood of "very unpleasant surprises down the road," he said, once the immigrant has to start paying taxes and hasn't prepared his finances accordingly. In addition, Grossman believes that the tax exemption law "opens the door to tax evasion, criminal activities and money laundering." With no general filing requirement in Israel, "local tax authorities simply won't have any reliable information about new residents utilizing the proposed exemption," he explained. Grossman has a more far-reaching proposal: "I believe that increased immigration to Israel, and reduced emigration, can be more easily achieved by reducing corporate and individual tax rates for all Israelis."
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The
reform was designed at the initiative of the Tax Authority and the
Absorption Ministry in the context of the "Returning Home for Israel's 60th
Anniversary" project, aimed at drawing back to Israel thousands of Israelis
who currently live abroad. A joint Absorption Ministry-Tax Authority team
presented the initiative to the Finance Ministry, where it was approved as
part of the general government effort to promote Aliyah (immigration to
Israel).