Before you start

A determination of your Israeli tax residency
A Teudat Zehut if you have made aliyah, or passport and visa details
A tax file, opened by your employer for PAYE or by you if self-employed
For arnona: the tenancy in your name and, for the olim discount, your teudat oleh

Step-by-step

1
Settle your residency position before your first year-end
The test is centre of life — family, home, economic ties — backed by presumptions at 183 days in a year, or 30 days in a year totalling 425 over three. It can catch a remote worker under 183 days. The tax year is the calendar year.
OnlineWho: You, with an accountant if you have foreign income
2
Confirm whether the ten-year olim exemption applies
Olim and senior returning residents are exempt from Israeli tax on foreign-source income and foreign capital gains for ten years. It does not cover Israeli salary or Israeli freelance income. From 1 January 2026 new residents must disclose foreign assets and income even while exempt.
OnlineWho: You
3
Check whether your exact locality carries a preferred-settlement credit
Section 11 of the Income Tax Ordinance grants an income-tax credit to residents of designated peripheral localities, at rates and ceilings that vary by locality. The list is set by the Finance Ministry and is revised, and neighbouring places in the Negev can be treated differently. Verify your specific address against the current schedule with your employer's payroll or an accountant rather than assuming.
OnlineWho: You, with your employer or accountant
4
If employed, file Form 101 and let PAYE run
Your employer withholds income tax, National Insurance and health tax monthly. Submit Form 101 at hire and each January so credit points apply — this is also where a locality credit is claimed if you qualify.
Via employerWho: Your employer
5
If self-employed, open income-tax, VAT and Bituach Leumi files
Choose osek patur below the small-dealer turnover threshold, which charges no VAT and files annually, or osek murshe, which charges VAT and files periodically. Standard VAT is 18% since 1 January 2025.
In personWho: YouRegister before your first invoice
6
Register for arnona with the municipality in your own name
Arnona is billed to the occupier, not the owner. Register with your lease so the bill is issued to you — which also gives you the cleanest proof-of-address document in Israel and is a precondition for every discount, including the olim reduction on up to 100 square metres for twelve months chosen from your first twenty-four.
OnlineWho: You

Documents you’ll need

Teudat Zehut, or passport and residency proof
Form 101 for employees, or business registration for the self-employed
Teudat oleh for the ten-year exemption or the arnona discount
Proof of address for any locality-based tax credit
Lease agreement for arnona registration

Things most newcomers don’t know

The peripheral-locality credit is real, address-specific and frequently misapplied.

Section 11 of the Income Tax Ordinance gives residents of designated localities an income-tax credit, and the Negev has many qualifying places — but the schedule is set by the Finance Ministry, the rates and ceilings vary between localities, and the list changes. Two neighbouring Negev addresses can be treated differently. It is claimed through payroll, so a wrong assumption shows up as an under- or over-withholding you only notice at year end. Verify the current schedule for your exact locality.

Source: Income Tax Ordinance s.11; Israel Tax Authority preferred-settlement schedule

In Israel's cheapest rental market, arnona is a bigger share of housing cost than you expect.

Arnona is charged per square metre of floor area by municipal zone and takes no account of what you pay in rent. Against a ₪3,131 average monthly rent — the lowest of Israel's large cities — the same arithmetic that makes arnona a rounding error in Tel Aviv makes it a real line item here, and a large cheap flat can carry a bill that eats a chunk of the saving. Get the registered metreage and the zone before you sign.

Source: Israeli arnona methodology; CBS Q1 2026 rental data

The ten-year exemption covers foreign capital gains as well as foreign income.

Selling overseas shares, property or a business inside the window can be free of Israeli tax where the gain is foreign-source. Most olim know the income side and underuse the gains side, and against a 25% capital gains charge the difference is large. Time any disposal with an accountant early rather than in year nine.

Source: Israel Tax Authority — olim and returning resident benefits

From 2026 the exemption survives but the reporting exemption does not.

The reporting exemption that used to run alongside the ten-year tax exemption was abolished for anyone becoming resident on or after 1 January 2026. Foreign income stays untaxed but must be disclosed. Guidance written before the change implies 'exempt' means 'not reported', which is no longer true and can produce penalties rather than tax.

Source: Amendment to the Income Tax Ordinance effective 1 January 2026

Common mistakes to avoid

Assuming a Negev address automatically carries a preferred-settlement tax credit — the schedule is locality-specific and revised.
Assuming the ten-year exemption shelters an Israeli salary or Israeli freelance income. It does not.
Treating the post-2026 disclosure duty as optional because no tax is due.
Comparing two flats on rent alone when arnona differs by zone and by registered square metreage.
US citizens forgetting that the Israeli exemption does not remove US filing, FBAR or FATCA obligations.

Some of this may be out of date. Spotted something inaccurate? Help us keep it right for the next newcomer.