A large and growing number of Olim arrive in Israel while continuing to work for their employer or clients in their home country. The rise of remote work has made this arrangement increasingly common, but it raises a specific set of questions that most general Aliyah guides do not address: what happens to your tax status, what does your employer need to know, and where do you stand for social insurance purposes? This guide sets out the main issues and practical ways to handle them.
You Become an Israeli Tax Resident from Day One
From the date of Aliyah, you are an Israeli tax resident. This is not optional and does not depend on your employment arrangements. Israeli tax residency means Israel considers you within its tax system. For Israeli-sourced income, Israeli income tax rates apply from day one. For foreign-sourced income, new Olim benefit from the 10-year exemption on foreign income and gains under Section 14 of the Israeli Income Tax Ordinance. The interaction between this exemption and remote work income is the most important tax question for this group of Olim.
Is Remote Work Income Covered by the 10-Year Exemption?
This is genuinely contested territory, and the answer depends on how the income is classified. Income is generally classified as Israeli-sourced if the work is performed in Israel, and foreign-sourced if it is performed abroad. When you sit at a desk in Tel Aviv working for a company headquartered in London, the Israel Tax Authority takes the position that the income is Israeli-sourced (because the work is performed in Israel) rather than foreign-sourced. Under that analysis, the 10-year exemption does not shelter it.
The situation is not entirely settled, however. Some tax advisers argue that if you remain on a foreign employment contract, the income retains a foreign character. The Israel Tax Authority has issued rulings on specific cases, and the outcome can vary depending on the structure of the arrangement. If you want the income to benefit from the exemption and this matters significantly to your finances, seek a formal tax ruling (chuliat mas) from a qualified Israeli tax adviser before assuming it applies. The cost of a ruling is small relative to the potential tax saving.
What Your Employer Needs to Know
This is where many remote Olim underestimate the complexity. When you move to Israel and continue working for a foreign company, your employer may inadvertently create a tax problem for themselves: a “permanent establishment” in Israel. Under international tax rules, if a company’s employee works from a country on a sustained basis, the tax authorities of that country may argue the company has a taxable presence there, which can expose the company to Israeli corporate tax obligations.
Permanent establishment risk is most acute when the employee has the authority to sign contracts or close deals on behalf of the company, or when the arrangement looks as though the company is operating in Israel through the employee. Your HR or legal team may not be familiar with Israeli permanent establishment rules and may not raise the issue proactively. It is worth flagging this with them and asking the company to get advice from an Israeli tax attorney or international tax counsel. Most foreign companies that support employees relocating to Israel handle this by either setting up Israeli payroll through a local employer of record (EOR) service, or by converting the arrangement to a consultancy contract where the Oleh registers as a self-employed contractor in Israel.
Three Common Structures for Remote Olim
In practice, remote Olim working for foreign companies typically end up in one of three arrangements.
The first is remaining on the foreign payroll with the company taking no action. This is the simplest from an HR perspective but creates permanent establishment risk and leaves your tax and social insurance obligations in Israel unaddressed. It is the least satisfactory arrangement from a compliance standpoint and the one most likely to create problems down the line.
The second is converting to a contractor arrangement. You register as an osek murshe in Israel, invoice your former employer as a client, and handle your own Israeli tax, Bituach Leumi, and VAT obligations. This eliminates permanent establishment risk for the company and gives you clarity on your Israeli obligations. It is the most common arrangement for Olim working for foreign companies from Israel.
The third is the employer setting up Israeli payroll through an employer of record service. Several international EOR providers operate in Israel. The Oleh becomes a local employee in Israel, with Israeli tax and benefits handled by the EOR. This is cleaner from a compliance standpoint but involves additional cost for the employer.
Bituach Leumi When Working Remotely
Regardless of your employment structure, you are required to register with Bituach Leumi as an Israeli resident from the date of Aliyah. If you are self-employed (an osek murshe invoicing a foreign client), you pay Bituach Leumi contributions as an atzmai (self-employed person) on your business income. If you are on Israeli payroll via an EOR, contributions are deducted in the normal employee way. If you remain on foreign payroll with no Israeli registration, you are technically non-compliant with Israeli social insurance obligations in addition to the unresolved tax issues.
VAT on Services to Foreign Clients
If you register as an osek murshe in Israel, you are required to charge and remit Israeli VAT (ma’am, currently 17%) on your services. However, services exported to foreign clients (clients located outside Israel) are generally zero-rated for VAT purposes under Israeli tax law. This means you charge 0% VAT to your foreign client but still file VAT returns with the Israel Tax Authority. This is zero-rating on an exported service, not zero-registration. Confirm this structure with your Israeli accountant when you set up your business registration.
Frequently Asked Questions
Can I keep working for my foreign employer after making Aliyah?
Yes, many Olim do. The practical question is how to structure the arrangement to comply with Israeli tax and social insurance law, and to protect your employer from unintended Israeli tax exposure. The most common solutions are converting to a contractor arrangement (registering as an osek murshe in Israel) or having your employer engage an employer of record service in Israel. Either way, get Israeli tax advice before continuing in an unstructured foreign employment arrangement past the first few months of Aliyah.
Does the 10-year tax exemption cover my remote work income?
Probably not for income earned by working in Israel, even for a foreign employer. The Israel Tax Authority generally treats income as Israeli-sourced when the work is performed in Israel, regardless of where the employer is based. There are arguments to the contrary, but they are not settled law. If this question matters significantly to your financial situation, seek a formal tax ruling from a qualified Israeli tax adviser rather than assuming the exemption applies.
What is a permanent establishment and why does it matter for my employer?
A permanent establishment is a taxable presence a foreign company can inadvertently create in another country when an employee works there on a sustained basis. If the Israel Tax Authority determines that your foreign employer has a permanent establishment in Israel through you, the company may face Israeli corporate tax obligations. The risk is highest when the employee has authority to commit the company to contracts or has a senior decision-making role. If that describes your situation, your employer should get international tax advice before your relocation.
Do I need to register as an osek murshe if I work remotely for a foreign client?
If you are providing services to a foreign company as an independent contractor rather than as a salaried employee, yes. You must register as an osek murshe (or osek patur if your annual income is below the threshold, currently around NIS 120,000) with the Israel Tax Authority and with Bituach Leumi. You will file periodic VAT returns, an annual income tax return, and quarterly Bituach Leumi advance payments. Services exported to foreign clients are zero-rated for VAT. An Israeli accountant who works with self-employed Olim can set this up efficiently.
What if my employer will not support my move to Israel?
Some employers, particularly in regulated industries or those with strict data residency requirements, are unable or unwilling to allow employees to work from Israel. If your employer cannot support a remote arrangement, you may need to negotiate a severance arrangement and look for Israeli-based employment instead. The Israeli tech sector and multinationals with Israeli offices are strong starting points. Nefesh B’Nefesh runs regular employment fairs specifically for Olim, and LinkedIn remains the primary platform for job searching in Israel’s professional market.