New Israeli Tax Rules Offer Social Security Relief for US Immigrants and Update Business Invoice Procedures
Your Taxes: New Israeli rules could save US olim money and affect businesses
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New amendments to Israel's National Insurance Law will exempt US olim from paying Israeli social security contributions for five years, effective 2026. Additionally, businesses must now obtain an allocation number for tax invoices over NIS 5,000 to prevent VAT fraud.
- 01The National Insurance Law Amendment 262 allows US olim to be exempt from Israeli social security contributions for five years if they pay US social security, effective from 2026.
- 02This exemption applies only to olim who migrated under the Law of Return and does not affect those who immigrated before 2026.
- 03Businesses issuing invoices over NIS 5,000 will need to obtain an 'Israel Invoice' allocation number from the Israel Tax Authority starting June 1, 2026.
- 04The threshold for requiring an allocation number has decreased from NIS 10,000, aimed at preventing VAT fraud.
- 05Employers' national insurance contributions remain unchanged, and payroll procedures for US olim employees are yet to be clarified.
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Amendments to Israel's National Insurance Law, effective from January 2026, will exempt new US immigrants (olim) from paying Israeli national insurance contributions on employment income for five years, provided they pay US social security. This change is intended to alleviate the financial burden of double contributions for olim who migrated under the Law of Return. However, the exemption does not apply to those who immigrated before 2026 or to olim from countries like Australia or South Africa. Additionally, starting June 1, 2026, businesses must secure an 'Israel Invoice' allocation number for tax invoices exceeding NIS 5,000 to combat VAT fraud. This new regulation reduces the previous threshold of NIS 10,000 and aims to ensure that VAT can only be claimed on legitimate invoices. Companies will need to adapt their payroll systems accordingly, and self-employed olim must request exemptions from the National Insurance Institute. Employers' contributions to national insurance remain unaffected by this amendment, and the specifics of payroll procedures for US olim employees are still to be determined.
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The new tax rules will significantly reduce the financial burden on US olim by exempting them from certain social security contributions, potentially increasing their disposable income. Businesses will need to adjust their invoicing procedures, impacting cash flow and compliance costs.
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