The Law Amending the Income Tax Ordinance (No. 272), 5784-2024, was published in Sefer HaChukim 3205, the official gazette, on 7 April 2024. It does not touch the tax exemption in section 14(a) of the Ordinance. It changes the reporting duties of an individual who becomes an oleh or a senior returning resident, and of companies and trusts connected to him. It also changes the return particulars required of bodies corporate generally, and it imposes a trust notice duty that does not depend on anyone's oleh status.

Two notes before the substance. A senior returning resident, in Hebrew toshav chozer vatik, is an individual who became an Israeli resident again after at least ten consecutive years as a foreign resident; an ordinary returning resident is a different category, with substantially smaller benefits. And the Ordinance and the amending law exist in Hebrew only, so the English wording given for them here is a rendering rather than an official text.

Section 11 of the amending law, the commencement provision, provides that the commencement of sections 214B and 214C of the Ordinance and section 31A of the Prohibition on Money Laundering Law, as worded in sections 8 to 10 of this law, shall be on 1 October 2024. It covers three provisions only, none of which is discussed here. Some of the other provisions have application dates set in sections 12 and 13. The amending law sets no other application dates, so a provision not covered by sections 12 or 13 takes effect when the law itself does, on publication. Each provision has to be examined separately.

The two exemptions that were repealed

Section 5 of the amending law provides that section 134B of the Ordinance is repealed. Section 134B read: notwithstanding the provisions of section 131, an individual who became an Israeli resident for the first time or a senior returning resident, as stated in section 14(a), shall not be obliged to file a return under section 131 in respect of all his income produced or accrued outside Israel or sourced in assets outside Israel, for ten years from the date on which he became an Israeli resident as stated. It then excluded income for which the individual had asked, under section 14(a), that the exemption not apply, and income sourced in an asset that reached him tax free under section 97(a)(5) from 1 January 2007.

Section 6 provides that sub-paragraph (b) of section 135(1) is deleted. That sub-paragraph read: notwithstanding the provisions of sub-paragraph (a), an individual who became an Israeli resident for the first time or a senior returning resident, as stated in section 14(a), shall not be obliged to file a return on his capital and assets outside Israel, for ten years from the date on which he became an Israeli resident as stated. It carried the same two carve-outs, for capital and assets whose income, in whole or in part, the individual had asked not to be exempted, and for an asset that reached him tax free under section 97(a)(5) from 1 January 2007.

Sub-paragraph (a), to which it refers, empowers the assessing officer, in Hebrew pekid shuma, to require in writing any return specified in the notice, and including a return on the capital and assets of that person, or of his spouse and of their children for whom they are entitled to credit points or to allowance points, or on assets in respect of which he acts as another person's trustee, and the provision continues beyond that.

That is a capital statement, in Hebrew hatzharat hon: a statement of assets and liabilities at a given date, which the assessing officer demands. The reach of the power is the point. It extends beyond the individual to his spouse, to children for whom credit points are claimed, and to assets he holds as a trustee. The effect of the deletion is that the individual's own capital and assets outside Israel are no longer immune from such a demand.

Repealing the exemptions does not in itself create a duty to report. For the annual return, the duty is fixed by the filing provisions of the Ordinance and by the exemption regulations made under section 134A, and the scope of the return required in a given case has to be examined under them. A capital statement arises only if the assessing officer demands one in a notice under section 135(1).

The group tied to the date of entering the status

Section 12(a) of the amending law lists one group of provisions: the amendments to sections 14, 75P1, 75P2(a)(2), 135(1) and 135A1, together with the repeal of section 134B. For that group it provides that they shall apply to a person who became an Israeli resident for the first time or who became a senior returning resident, as stated in section 14(a), from 1 January 2026 onward.

The test here is the date on which the individual entered the status, not the tax year in which the return is filed. The result is two parallel populations over the coming decade:

These two rows concern the provisions in section 12(a) only. The amendment to section 131 and the new trust notice duty apply on other dates.

The provisions tied to other dates

Section 12(b) deals with the amendment to section 131 of the Ordinance and provides that it applies to a return that has to be filed for the 2025 tax year onward. The link here is to the tax year, and that amendment is not confined to olim or senior returning residents.

The provision that added section 75P2(c) to the Ordinance, section 3(2) of the amending law, is not among the group in section 12(a). It is not deferred to 1 January 2026 and it is not conditional on anyone concerned being an oleh or a senior returning resident. Section 13 sets a transitional rule for it, by reference to the date the trust was created.

What was added to section 131

Section 4 of the amending law adds, at the end of paragraphs 131(c1)(1)(a) and 131(c1)(2)(a) of the Ordinance, the words: and if any of these is not an individual, also the particulars of an individual who is a controlling shareholder in it. Who "these" are is fixed by those paragraphs of the Ordinance themselves, and not by the wording of the amendment. Section 4 also provides, for the purposes of sub-section (c1), that a controlling shareholder means as defined in paragraph (1) or (2) of the definition in section 135B.

A new section 131(c3) was added: in a return under sub-section (a)(5), the particulars of everyone who was a controlling shareholder in the body corporate during the tax year shall be set out, together with the residence of each of them. For that sub-section the reference to section 135B is to the definition in full, without the limitation to paragraphs (1) or (2) that applies to sub-section (c1).

Section 4 also adds section 131(h), under which the Minister of Finance, with the approval of the Knesset Finance Committee, may prescribe, in respect of a person obliged to file a return and in relation to the controlling shareholder particulars under sub-sections (c1) and (c3), provisions on identifying a controlling shareholder and provisions on recording, documentation, retention of documents and keeping records in respect of those identifying particulars.

The background

In an announcement of July 2024 the Tax Authority presented the amendment in the context of Israel having met the peer review of the Global Forum on Transparency and Exchange of Information for Tax Purposes.

The legal point behind it is narrower and more useful. In the Talmi case it was held that the exemption under section 14 depends on one of two alternatives: the place where the income was produced being outside Israel, or the income being sourced in an asset situated outside Israel. Where income is mixed, the exemption applies only to the part produced outside Israel. Section 134B, on its own wording, exempted from filing in respect of income produced or accrued outside Israel. An individual who produced income partly from Israel therefore had to identify the split in order to know what the exemption covered, and the split did not have to appear in any return.

A foreign company managed from Israel by an oleh

In the definition of an Israeli resident in section 1 of the Ordinance, paragraph (b)(2) provides that a body corporate whose business is controlled and managed in Israel is an Israeli resident, except a body corporate the control over whose business and its management as stated are exercised in Israel by an individual who became an Israeli resident for the first time or who became a senior returning resident, as stated in section 14(a), and ten years have not yet elapsed from the date he became an Israeli resident as stated, or by someone on his behalf, provided that that body corporate would not have been an Israeli resident even had the control over its business and its management not been exercised by such an individual or by someone on his behalf, unless the body corporate requested otherwise.

The carve-out is therefore limited to ten years, conditional on the company not being an Israeli resident on any independent ground, and capable of being waived at the company's own initiative. Amendment 272 did not touch it.

Section 7 of the amending law added section 135A1 to the Ordinance, directed at that same company. The assessing officer may require it, by notice in writing, to deliver to him a return or information under section 131 or section 135. The periods set are minimum periods: for a return under section 131 no date shall be set earlier than the end of 90 days from the date of the demand, and for a return under section 135, not earlier than the end of 120 days.

Sub-section (b) adds that for the purpose of filing a report under this section, a body corporate shall maintain documentation in accordance with generally accepted accounting principles. The documentation duty is framed as derived from the reporting duty under that section. The section operates on a demand by the assessing officer, not as an annual filing obligation. Under section 12(a) it applies where the individual became an Israeli resident for the first time or a senior returning resident from 1 January 2026 onward.

Trusts

Section 2 of the amending law made two changes to section 75P1 of the Ordinance: the repeal of sub-section (a1), and the deletion of paragraph (2) of sub-section (c). Section 3(1) separately deleted, from section 75P2(a)(2), the closing words, which began: the provisions of this paragraph shall not apply. All three changes belong to the group in section 12(a) and are therefore tied to the date of entering the status.

Section 75P1(a1) provided that the notice duty in sub-section (a) does not apply to a settlor who became an Israeli resident for the first time or a senior returning resident, for ten years from the date he became an Israeli resident, provided that throughout that period he settled only an asset outside Israel or income from an asset outside Israel. It was a deferral rather than an extinction: at the end of the ten years sub-section (a) applied again, and the notice was then due by 30 April of the first tax year after that period ended, or, if the settlor was obliged to file a return under section 131, at the time of filing.

Section 3(2) of the amending law added section 75P2(c), which is a different matter altogether. An Israeli resident trustee of a trust who is not obliged to file a return under section 131(a)(5b) shall give notice to the Director of the Tax Authority, on a form prescribed by the Director, within 90 days of the date the trust was created, setting out the particulars of the controlling shareholders in the trust and the residence of each of them. Where the controlling shareholders then change, a further notice is due by 30 April of the tax year following the year of the change. For this sub-section a controlling shareholder is defined by reference to paragraph (3) of the definition in section 135B alone. Section 131 draws on the same definition differently: sub-section (c1) is limited to paragraphs (1) or (2), and sub-section (c3) uses the definition in full. The Minister of Finance, with the approval of the Knesset Finance Committee, was also empowered to prescribe provisions on identifying a controlling shareholder in relation to such a trustee.

The transitional rule. Section 13 of the amending law provides that a trustee of a trust created before the publication of this law shall file a notice as stated in section 75P2(c) of the Ordinance, as worded in section 3(2) of this law, within 120 days of 1 January 2026. It applies to trusts created before 7 April 2024, regardless of when the settlor became an Israeli resident. Section 3(2) has no special application date and therefore applies from the general commencement of the law, on 7 April 2024. A trust created after the publication date does not fall within the transitional rule in section 13, and the period in section 75P2(c) itself applies to a trustee within that sub-section, 90 days from creation.

The amendment to section 14

The tax exemption under section 14(a) was not repealed. The ten years of exemption on income produced or accrued outside Israel, or sourced in assets outside Israel, stand. The change is in reporting.

Section 14(b) is the adjustment year regime, under which an individual who became an Israeli resident for the first time or a senior returning resident is not regarded as an Israeli resident for one year from the date he immigrated or returned to Israel, provided he gave notice within 90 days of his arrival on a form prescribed by the Director. Section 14(b)(2) provides that the adjustment year is included in the count for the periods listed in it, and it lists them in sub-paragraphs.

Section 1 of the amending law replaced sub-paragraph (c) of section 14(b)(2). As enacted in 2008 it referred to the period in paragraph (2) of the definition of a foreign professional corporation, and in the definition of income of Israeli resident shareholders, in section 5(5)(e). It now refers to the period stated in paragraph (2) of the definition of a foreign professional corporation in section 75B1(a), and the period stated in paragraph (4) in section 75B1(d). Section 75B1 was not amended by this law.

Section 1 also deleted sub-paragraphs (e), (g) and (h) from section 14(b)(2), and the sub-paragraphs bearing those same three letters from section 14(d)(1). In section 14(b)(2) as enacted, those three referred to the period in section 75P1(a1) and (c)(2)(a), the period in section 134B, and the period in section 135(1)(b). Each of those provisions was repealed or deleted by this same law, so the deletion in section 14 is a consequence of the repeals. Like the rest of the section 12(a) group, it applies to a person who entered the status from 1 January 2026 onward.

What to do

The Tax Authority has published a draft circular on the amendment. The draft has not been given a final number and is not a binding text.

Further reading

Sources: Law Amending the Income Tax Ordinance (No. 272), 5784-2024, Sefer HaChukim 3205, 7 April 2024; Law Amending the Income Tax Ordinance (No. 168), 5768-2008, Sefer HaChukim 2184, 16 September 2008; Income Tax Ordinance [New Version], sections 1, 5, 14, 75B1, 75P1, 75P2, 97, 131, 134A, 134B, 135, 135A1 and 135B; Income Tax Regulations (Exemption from Filing a Return), 5748-1988; Prohibition on Money Laundering Law, 5760-2000; Civil Appeal 1779/18 Yehuda Talmi v. Kfar Saba Assessing Officer.

Last updated: 6 September 2026

This page is a general overview only. It is not legal or tax advice and should not be relied upon in making decisions. The application of these provisions depends on the date residence was established, on the type of provision, and on the facts of the case.