Israel is known as the “Startup Nation” for its culture science and technology. It is also a country that offers huge tax incentives to new immigrants for 10 years, including tax exemption on all their income generated outside Israel or whose source is from assets outside Israel…
Israel is a small country, about the same size as Belgium in Europe or New Jersey in North America. It is located on the eastern shore of the Mediterranean Sea and has excellent access by air and sea to Europe, Africa, Asia and North America. As the Middle East peace process moves forward, Israel’s strategic position and human resources will make it a central pillar of economic trade in the region. (1) (2) (3) (4)
Recent statistics show that Israel population is comprised of 75% Jews and 25% non-Jews 25%. (5)
All of whom enjoy equal legal rights in all areas of life. This equality of rights is one of the base principles upon which the State of Israel was established, as evident in the Declaration of Independence of the State of Israel of May 14, 1948. According to the Declaration, which is considered as a kind of a constitutional legal document, all citizens, of any faith any gender, are entitled to equal rights.
The word “Leom” is mistakenly considered as synonymous to “nationality” or “citizenship”. This mistake brings about to the erroneous conclusion that there are different classes of citizenships, and therefore people of different leoms do not enjoy equal rights. In fact, the word “Leom” refers to one’s faith. This means that one can belong to the Jewish leom, i.e. the group of Jewish people worldwide, and not necessarily be an Israeli citizen as well.
In order for a Jewish person to become an Israeli citizen, he or she must complete an immigration procedure.. Once the procedure is completed, the person is considered as an “Oleh Chadash” (New Immigrant), which means that he or she is eligible to become an Israeli citizen.
Any person of a Jewish family can initiate the immigration procedure and become an Oleh Chadash. While this process usually takes time and requires the immigrant to fulfil several conditions in order to receive this status, under the Law of Return of 1950, a Jewish person can acquire the status automatically. This privilege was given to Jewish people shortly after the establishment of the State of Israel in order to assist the hundreds of thousands Jewish refugees who survived the Holocaust, as well as Jewish people in many countries who wanted to leave their countries due to anti-Semitism, such as the Jewish people of Iraq and Yemen in the 1950’s, and the Jewish people of the former USSR in the 1990’s.
Benefits for new immigrants and returning residents (6)
The Israeli Income Tax Ordinance includes exemptions and other significant reliefs in relation to new immigrants and returning residents. A reform that came into force from 2007 significantly expanded the reliefs granted to those individuals.
The principal benefits are given to a new immigrant (one who became an Israeli resident for the first time) and a long-term returning resident (someone returning to Israel after having been a foreign resident for at least 10 years). Limited benefits are also given to regular returning residents (someone returning to Israel after having been a foreign resident for at least six years).
New immigrants and long-term returning residents are exempt from tax on all their income generated outside Israel or whose source is from assets outside Israel during the ten years from their date of immigration or return to Israel, including in relation to activities that commenced and assets acquired following the date of immigration or return. A regular returning resident is exempt from tax for five years from the date of return on current income (interest, dividends, royalties, rentals and pensions) generated outside Israel or whose source is from assets outside Israel, and for ten years on capital gains from the sale of such assets, all this being in relation to assets acquired by him or her while being foreign resident.
New immigrants and long-term returning residents need not report their exempt incomes nor report on their assets located outside Israel for a period of 10 years from their date of immigration or return to Israel.
As evident above, the State of Israel not only provides full equality of rights to all of its citizens, it encourages Jews from all over the world to immigrate and enjoy a full life.
Israel, the country of immigrants, absorbed a mass number of people coming from 70 countries. Over the years many of them established a culture of science and technology which has made Israel known as a “Startup Nation”.
- Certain parts of this article will be included in “Trusts and Estate Planning in Israel”, which will be published by Juris Publishing, Inc. in the coming fall.
- Alon Kaplan, PhD, TEP, was admitted to the Israel Bar in 1970 and appointed a notary in 1989. He was admitted to the New York Bar in 1990 and became a Member of the Frankfurt Bar in 2010. Alon was among the founders of STEP Israel and currently serves as its president. Alon is an academic coordinator and lecturer of the STEP diploma programme. He was also an adjunct lecturer at the law faculty of Tel Aviv University and lectured in its LLM programme. Alon is an academician of the International Academy of Estate and Trust Law and of the American College of Trust and Estate Counsel, and has advised the Israeli Tax Authority on trust legislation. Alon obtained a PhD from Zurich University in 2014. His doctoral dissertation was titled: “Trusts in Israel: Development and Current Practice.”
- Meytal Liberman, LL.M, TEP, was admitted to the Israel Bar in 2013, and is an Associate Advocate at Dr. Alon Kaplan, Advocate & Notary, where she also completed her legal internship. Meytal earned her LL.B. Degree at Bar Ilan University in 2012, and her LL.M. Degree at Tel Aviv University in 2015. Meytal is also a member of the Society of Trusts and Estates Practitioners (STEP).
- Alon Kaplan (General Editor), Trusts in Prime Jurisdictions, fourth edition (April 2016), chapter on Israel.
- Based on publications of the Israeli Central Bureau of Statistics: Israel’s population growth has been phenomenal and there is a continual influx of new immigrants from around the world. In 1882 there were only 24,000 Jews in Palestine, then part of the Ottoman Empire. In 1914, the number was 94,000, decreasing during WWI to 55,000. Continued immigration through the 1920s until 1948 brought the number of Jewish population to 630’000. This was the year when Israel gained independence.
By 1990, the population reached almost 4 million and a new wave of immigration from the countries of the former Soviet Union brought the 1996 population to 5.6 million. Israel’s current population is over eight million. The Jewish population is 75.3 percent of the total; the Arab population is 20.7 percent with other religions and those without religious affiliation being four percent.
These figures demonstrate the enormous task faced by the Israeli government and society in providing the necessary financial, legal and social services to such a large community of immigrants, from over 70 countries, with great differences in culture and background.
- John Riches (Editor), The Private Wealth & Private Client Review, Third Edition (2014), Israel Chapter, written by Alon Kaplan, Lyat Eyal, Ran Artzi, Eyal Sando and Hagi Elmekiessein, in page 223.