39 taxable in Israel, but will enjoy the lower progressive tax brackets applicable to earned income, as well as standard personal tax credits and deductions.” “For returning professionals, determining clear guidelines for allocating equitybased income between Israel and abroad provides significant certainty and removes one of the main barriers to returning to Israel,” adds Vered Meller, partner in the Tax Department at Shibolet. “Until now, professionals who worked abroad and held stock options or RSUs often faced uncertainty regarding their tax obligations upon returning. The exemption from tax on income generated and accrued outside of Israel eliminates concerns about double taxation and clarifies that Israel will not tax income earned during periods of non-residency.” “This represents a significant shift that eliminates a major disincentive to returning home,” they continue. “The mechanism for crediting foreign taxes paid on income also taxable in Israel prevents double taxation and ensures that professionals will not pay tax twice on the same income. The creation of a ‘green tax track’ for transitioning from Section 3(i) equity compensation taxation to Section 102 simplifies the return process and removes obstacles that previously discouraged relocation. The anticipated legislation to enhance certainty in determining tax residency based solely on the number of days spent in Israel creates certainty regarding the determination of residency and stability in governmental policy. Individuals will receive certainty regarding their tax residency status.” Dr. Yuval Navot, of Herzog, adds: “For returning Israelis and new immigrants in the tech sector, the improved stock-option regime financially facilitates relocation by removing regulatory barriers.” Taken together, the reforms signal that Israel is deliberately recalibrating its tax regime for a more competitive, more predictable, and globally integrated high-tech economy. Shibolet’s Vered Meller adds that the reform “creates a new business environment in which decision-making is accelerated due to reduced uncertainty and the removal of bureaucratic barriers, transaction costs are lowered through simplified procedures and clear guidelines, Israel’s competitive position strengthens compared to other leading global high-tech hubs, and “A new business environment”
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