On Tax Breaks for Immigrants

With Helena Ben Baruch, Adv.

New immigrants are eligible for a tax exemption on income from interest on a foreign currency bank deposit in Israel for 20 years from the date of their immigration to Israel.

The exemption applies only to money that the new immigrant possessed overseas, before moving to Israel.

To be entitled to the exemption the new immigrant must place the money in a deposit within 90 days of its transfer to Israel.

Furthermore, entitlement to the exemption is subject to the interest on the deposit not being considered income from a business and not used as collateral for a loan to a relative or company under the control of the new immigrant who are residents of Israel.

A new immigrant is also entitled to an exemption on interest income from an overseas deposit which he had before moving to Israel, but this exemption is limited to five years only. Thus there is a tax advantage in keeping money in a foreign currency deposit in Israel.

No tax return needed

Another advantage deriving from keeping the money in a deposit in Israel is that the very existence of this deposit does not constitute an obligation to file a tax return in Israel.
However, a foreign deposit in the amount of NIS 1.5 million or more, does in itself constitute an obligation to file a tax return after five years from immigrating to Israel.

Returning residents: 5-year exemption on money in Israel

A returning resident is also entitled to an exemption on income from interest in a foreign currency deposit in Israel, however, in the case of the returning resident, the exemption is limited to five years from the date of returning to Israel.

The exemption applies only to money that the resident had overseas, that accrued while being a returning resident and that is not derived from selling assets in Israel.

All other terms of the entitlement to the exemption are similar to the terms listed in respect to a new immigrant.

Exemption on money overseas

In practice the exemption period on interest income from a foreign currency deposit of a returning resident in Israel is identical to the exemption period applicable to the interest that he/she had overseas prior to returning to Israel.

Dr. Avraham Alter, Adv. is the founder of Dr. Avraham Alter & Co., Law Offices, which specializes in tax law.

In no case should this article be perceived as tax advice. The reader is advised to consult with experts before taking any steps.