{"id":8481,"date":"2025-09-30T07:05:45","date_gmt":"2025-09-30T07:05:45","guid":{"rendered":"https:\/\/aboulafia.co.il\/?p=8481"},"modified":"2025-09-30T07:05:45","modified_gmt":"2025-09-30T07:05:45","slug":"taxation-of-foreign-income-and-the-10-year-rule","status":"publish","type":"post","link":"https:\/\/aboulafia.co.il\/en\/binyamin-radomsky-en\/taxation-of-foreign-income-and-the-10-year-rule\/","title":{"rendered":"Taxation of foreign income and the 10-year rule"},"content":{"rendered":"<p style=\"text-align: left;\">Since 2003, Israel has joined the rest of the Western world in taxing its residents on their worldwide income.<\/p>\n<p style=\"text-align: left;\">Israel has also signed a number of Double Taxation Treaties with other countries which set out various rules for which country can tax certain incomes and in what scenarios. The Double Tax Treaties override the local tax law, so you get the best of both worlds.<\/p>\n<p style=\"text-align: left;\">This post will assume that a Double Tax Treaty is not in force, or that the income is taxable in Israel anyway. Of course, advice should be taken on taxation of the income in the country of origin. Furthermore, this post relates to Income Tax\u00a0<u>only<\/u>, and does not consider the Bituach Leumi aspects of earned income, or the equivalent abroad.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: left;\"><u>Tax on foreign income<\/u><\/p>\n<p style=\"text-align: left;\">In general, income from overseas is treated and taxed in the same way as Israeli income, and the same rules and rates apply. Israeli tax law though allows you to reduce the Israeli taxes due on that income by taking a credit for any foreign taxes paid. (See\u00a0<a href=\"http:\/\/taxinisrael.blogspot.co.il\/2013\/11\/property-income.html\" target=\"_blank\" rel=\"noopener\">here<\/a>\u00a0for the classic exemption of property income.) Of course, the credit is limited to the lower of foreign taxes actually paid and the Israeli taxes due on that income. Or in simple terms, you\u2019ll end up paying the highest rate between the two countries, but never more.<\/p>\n<p style=\"text-align: left;\">To make things somewhat complicated, the law allows you to claim foreign taxes paid in one country against taxes due on income earned from another country \u2013 but only within the same \u201cincome basket\u201d.\u00a0For example\u00a0you can claim UK taxes paid on UK interest against interest earned from all corners of the Earth, but not against foreign dividend or self-employment income.<\/p>\n<p style=\"text-align: left;\">Another complication is the calculation of the Israeli tax considered due on foreign income. For fixed-rate incomes (e.g. interest, dividends etc.), the fixed\u00a0rate is applied to the foreign income. That\u2019s fairly easy. But for incomes where the tax rates are based on the bands, the calculation gets very complicated, and it\u2019s fair to say that someone with both Israeli and foreign types of this income ends up paying significantly more Israeli taxes than had they not had the foreign income at all \u2013 even if the foreign income is well in excess of what the Israeli taxes would be. If that sounds complicated and unfair, that\u2019s because it is \u2013 and there\u2019s no remedy under the current legislation.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: left;\"><u>Exchange rates<\/u><\/p>\n<div style=\"text-align: left;\">Of course, Israeli taxes are based on the shekel values of incomes and overseas taxes paid. The tax law states that each transaction is to be translated at the official\u00a0<a href=\"http:\/\/www.boi.org.il\/en\/Markets\/ExchangeRates\/Pages\/Default.aspx\" target=\"_blank\" rel=\"noopener\">Bank of Israel exchange rate<\/a>.<\/div>\n<div style=\"text-align: left;\"><\/div>\n<div style=\"text-align: left;\">That\u2019s not always practical, and in that situation I would use the average exchange rate, either for the month or the whole year.<\/div>\n<div style=\"text-align: left;\">\n<p>&nbsp;<\/p>\n<p style=\"direction: ltr;\"><u>The 10-year rule<\/u><\/p>\n<p style=\"direction: ltr;\">Anyone who became a new resident of Israel (Oleh Chadash), or is considered a veteran returning resident (lived out of Israel for at least 10 years) from 1st January 2007, is entitled to a 10-year exemption from paying\u00a0<u>Israeli<\/u>\u00a0taxes on\u00a0<u>non-Israeli<\/u>\u00a0income. The 10-year starts on the day that their residency is considered to have changed to Israel, and ends on the 10th anniversary.<\/p>\n<\/div>\n<div style=\"text-align: left;\">The definition of non-Israeli income is crucial here. The tax law defines where different types of income are considered to have been earned. The most important element for this post is that self-employment income is considered earned in the country in which the work is actually done. What that means in practical terms is that anyone working from Israel for a non-Israeli organisation<strong>\u00a0is considered to be earning Israeli income<\/strong>, which is subject to Israeli taxes, even within the ten years.<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Since 2003, Israel has joined the rest of the Western world in taxing its residents on their worldwide income. Israel has also signed a number of Double Taxation Treaties with other countries which set out various rules for which country can tax certain incomes and in what scenarios. The Double Tax Treaties override the local [&hellip;]<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[200,253],"tags":[],"class_list":["post-8481","post","type-post","status-publish","format-standard","hentry","category-israeli-taxation-en","category-binyamin-radomsky-en"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.2 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Taxation of foreign income and the 10-year rule - \u05d0\u05d1\u05d5\u05dc\u05e2\u05e4\u05d9\u05d4 \u05e8\u05d5\u05d0\u05d9 \u05d7\u05e9\u05d1\u05d5\u05df<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/aboulafia.co.il\/en\/binyamin-radomsky-en\/taxation-of-foreign-income-and-the-10-year-rule\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Taxation of foreign income and the 10-year rule - \u05d0\u05d1\u05d5\u05dc\u05e2\u05e4\u05d9\u05d4 \u05e8\u05d5\u05d0\u05d9 \u05d7\u05e9\u05d1\u05d5\u05df\" \/>\n<meta property=\"og:description\" content=\"Since 2003, Israel has joined the rest of the Western world in taxing its residents on their worldwide income. Israel has also signed a number of Double Taxation Treaties with other countries which set out various rules for which country can tax certain incomes and in what scenarios. The Double Tax Treaties override the local [&hellip;]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/aboulafia.co.il\/en\/binyamin-radomsky-en\/taxation-of-foreign-income-and-the-10-year-rule\/\" \/>\n<meta property=\"og:site_name\" content=\"\u05d0\u05d1\u05d5\u05dc\u05e2\u05e4\u05d9\u05d4 \u05e8\u05d5\u05d0\u05d9 \u05d7\u05e9\u05d1\u05d5\u05df\" \/>\n<meta property=\"article:published_time\" content=\"2025-09-30T07:05:45+00:00\" \/>\n<meta name=\"author\" content=\"Rachel Levin\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Rachel Levin\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/aboulafia.co.il\/en\/binyamin-radomsky-en\/taxation-of-foreign-income-and-the-10-year-rule\/\",\"url\":\"https:\/\/aboulafia.co.il\/en\/binyamin-radomsky-en\/taxation-of-foreign-income-and-the-10-year-rule\/\",\"name\":\"Taxation of foreign income and the 10-year rule - \u05d0\u05d1\u05d5\u05dc\u05e2\u05e4\u05d9\u05d4 \u05e8\u05d5\u05d0\u05d9 \u05d7\u05e9\u05d1\u05d5\u05df\",\"isPartOf\":{\"@id\":\"https:\/\/aboulafia.co.il\/en\/#website\"},\"datePublished\":\"2025-09-30T07:05:45+00:00\",\"author\":{\"@id\":\"https:\/\/aboulafia.co.il\/en\/#\/schema\/person\/2054089d644528990cb12e0974ece747\"},\"breadcrumb\":{\"@id\":\"https:\/\/aboulafia.co.il\/en\/binyamin-radomsky-en\/taxation-of-foreign-income-and-the-10-year-rule\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/aboulafia.co.il\/en\/binyamin-radomsky-en\/taxation-of-foreign-income-and-the-10-year-rule\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/aboulafia.co.il\/en\/binyamin-radomsky-en\/taxation-of-foreign-income-and-the-10-year-rule\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"\u05d3\u05e3 \u05d4\u05d1\u05d9\u05ea\",\"item\":\"https:\/\/aboulafia.co.il\/en\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Taxation of foreign income and the 10-year rule\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/aboulafia.co.il\/en\/#website\",\"url\":\"https:\/\/aboulafia.co.il\/en\/\",\"name\":\"\u05d0\u05d1\u05d5\u05dc\u05e2\u05e4\u05d9\u05d4 \u05e8\u05d5\u05d0\u05d9 \u05d7\u05e9\u05d1\u05d5\u05df\",\"description\":\"Just another WordPress site\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/aboulafia.co.il\/en\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/aboulafia.co.il\/en\/#\/schema\/person\/2054089d644528990cb12e0974ece747\",\"name\":\"Rachel Levin\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/aboulafia.co.il\/en\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/8645467386afae1c19e26d165518fc0e843acc6ffb76cb6b7207c4138d63a605?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/8645467386afae1c19e26d165518fc0e843acc6ffb76cb6b7207c4138d63a605?s=96&d=mm&r=g\",\"caption\":\"Rachel Levin\"},\"url\":\"https:\/\/aboulafia.co.il\/en\/author\/rachel\/\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Taxation of foreign income and the 10-year rule - \u05d0\u05d1\u05d5\u05dc\u05e2\u05e4\u05d9\u05d4 \u05e8\u05d5\u05d0\u05d9 \u05d7\u05e9\u05d1\u05d5\u05df","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/aboulafia.co.il\/en\/binyamin-radomsky-en\/taxation-of-foreign-income-and-the-10-year-rule\/","og_locale":"en_US","og_type":"article","og_title":"Taxation of foreign income and the 10-year rule - \u05d0\u05d1\u05d5\u05dc\u05e2\u05e4\u05d9\u05d4 \u05e8\u05d5\u05d0\u05d9 \u05d7\u05e9\u05d1\u05d5\u05df","og_description":"Since 2003, Israel has joined the rest of the Western world in taxing its residents on their worldwide income. 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