Smotrich Unveils Major Tax Exemption Plan for 2026 Immigrants

Finance Minister Bezalel Smotrich and Minister of Immigration and Absorption Ofir Sofer announced Thursday a new tax exemption plan for Jews making aliyah in 2026, offering a full two-year exemption from income tax on Israeli earnings.

Under the proposed reform, new immigrants (Olim Chadashim) and returning residents who lived abroad for at least ten years would pay 0% income tax in 2026 and 2027, then gradually move to 10% in 2028, 20% in 2029, and 30% in 2030, with normal tax rates resuming in 2031. The plan applies only to those making aliyah in 2026 and would be capped at ₪1 million per person per year, meaning a couple could earn up to ₪2 million annually tax-free.

According to Calcalist, many professional officials in the Finance Ministry opposed the plan, arguing that it lacks economic justification and would mainly benefit high-income earners. The plan’s total estimated cost over four years is ₪500 million. Critics inside the ministry said the reform duplicates existing incentives already available to olim, including a ten-year exemption on foreign income, multiple tax credits, and reduced taxes on home and vehicle purchases. 

Despite some criticism, Smotrich emphasized that the initiative reflects a commitment to encourage aliyah and invigorate Israel’s economy. The proposal is now advancing toward Knesset approval.

The announcement was made Thursday morning at the offices of Nefesh B’Nefesh, a nonprofit organization that assists new immigrants. The event, broadcast by the Government Press Office, drew senior civil servants and representatives from immigrant organizations.

Smotrich told the audience that Israel must make 2026 a “year of aliyah revolution.”:

“Zionism has always rested on three pillars — settlement, security, and aliyah,” he said. “We have invested heavily in security. Now, 2026 will be the year of aliyah. Not as a slogan, but as a working plan. I call on the Jews of the Diaspora and Israelis abroad: come home.”

Minister Sofer added that the move builds on three years of reforming Israel’s absorption system. “This is a professional, data-based initiative designed to ensure optimal integration of olim and to give them a real opportunity to succeed,” Sofer said. “At the same time, it will boost Israel’s economy.”

Smotrich acknowledged the criticism, saying he also intends to “lower taxes for all Israeli citizens,” hinting at a possible unfreezing of the 2026 tax brackets. Still, Treasury professionals said this would not balance the broader inequality created by the reform.

Supporters within the government say the measure will attract skilled professionals, entrepreneurs, and investors from Jewish communities worldwide at a time of rising antisemitism abroad and shifting global tax conditions.

Smotrich summed up his message simply: “It’s worth being an oleh.”