Aliyah, assets and French tax

Oleh hadash status and your French-source income: the 10-year exemption and its limits

Israel exempts for ten years the foreign-source income and capital gains of new immigrants (olim hadashim) and returning residents of long-term absence. This exemption, arising from the 2008 amendment 168, applies only to Israeli tax: French-source income remains taxable in France. Rental income faces the minimum rates of 20% or 30% under French tax code article 197 A and social levies of 17.2%; dividends are subject to withholding tax of 12.8%; real property gains incur the 19% levy plus social levies. The Israeli exemption can even work against you: with no Israeli tax due, French tax becomes a final, non-creditable charge. The firm advises on French tax law for families in aliyah or already established in Israel, in coordination with Israeli counterparts.

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— En bref
Israeli exemption
Ten years on foreign-source income and gains, for olim hadashim and residents returning after ten years abroad (vatik)
Declaration exemption
Eliminated by the 2 April 2024 reform for persons becoming Israeli residents from 1 January 2026
French income
Remains taxable in France: minimum rates of 20% or 30% (CGI art. 197 A), withholding taxes, article 244 bis A levy
Social levies
17.2% on rental income and real property gains; reduced rate of 7.5% reserved for affiliates of EU, EEA, Switzerland or UK social security schemes
End of ten years
Shift to worldwide Israeli taxation: disposals, restructuring and gifts should be planned before the deadline
— 01

A ten-year Israeli exemption, with no effect on French tax

Since the Israeli 2008 reform (amendment 168 of the Income Tax Ordinance), new immigrants (olim hadashim) and returning residents of long-term absence (vatik, after at least ten years abroad) enjoy a ten-year exemption from Israeli income tax on their foreign-source income and capital gains: interest, dividends, rental income from property outside Israel, royalties, private pensions and capital gains. This regime historically included an exemption from reporting these income sources.

This declaration exemption is ending: the amendment adopted on 2 April 2024 restores the obligation to declare foreign income and assets for persons becoming Israeli residents from 1 January 2026. The ten-year exemption remains in place, but now occurs under the scrutiny of the tax authorities, with automatic exchange of information between France and Israel effective since 2019.

The point most often misunderstood in practice lies elsewhere: the Israeli exemption is strictly Israeli. It does not limit France's right to tax French-source income, which the 31 July 1995 treaty assigns broadly to France: real property income and gains (articles 6 and 13), dividends subject to withholding tax (article 10), plus wealth tax on French real estate. It can even backfire: Israel eliminates double taxation by crediting French tax against Israeli tax (article 23); with no Israeli tax during the exemption period, there is nothing to credit against. French tax then becomes a permanent charge.

The firm advises in French tax law exclusively. For the Israeli side of the matter (oleh status, entry into the regime, end of period), we work with Israeli counterparts, attorneys and accountants, to ensure consistency across both jurisdictions.

— 02

Your French income during the ten years, line by line

01

Rental income: minimum rates and full social levies

Rent from French real property remains taxable in France (treaty article 6), under the non-resident regime.

  • 20% minimum rate up to EUR 29,315 of net taxable rental income (2024 income, threshold updated annually) then 30% above (CGI art. 197 A), unless electing the average rate when more favorable
  • Social levies of 17.2% (CSS art. L. 136-6 et seq.): a resident of Israel does not qualify for the reduced 7.5% levy, reserved for affiliates of EU, EEA, Switzerland or UK social security schemes
  • Frequent total burden of 37.2% to 47.2% on net rental income, with no offsetting Israeli tax during the exemption period
  • Planning options to model before departure: hold directly, convert to furnished rental status, hold through a corporation, or sell
02

Dividends and financial income: the treaty withholding tax

Dividends from French corporations are subject to French withholding tax, which the Israeli exemption does not refund.

  • Domestic withholding tax of 12.8% for individuals (CGI art. 119 bis, 2 and 187), below the treaty cap of 15% under article 10
  • Treaty rate of 5% reserved for corporations holding at least 10% of the distributing company's capital
  • Interest and royalties: withholding capped at 10% by articles 11 and 12, with targeted exemptions by debt type
  • During the Israeli exemption, these French withholdings are a permanent cost: no offset possible in Israel, as there is no Israeli tax to credit
03

Real property gains and wealth tax: France retains primary authority

Sale of French real estate and its ownership remain subject to French taxation (articles 6 and 13 of the treaty).

  • 19% levy (CGI art. 244 bis A) and social levies of 17.2%, plus surtax on gains exceeding EUR 50,000
  • Designation of an accredited tax representative required; exemption reserved for EU, Iceland and Norway residents; targeted exemptions if purchase price does not exceed EUR 150,000 or if holding period reaches thirty years
  • Wealth tax maintained on French real estate (CGI art. 964) once net taxable value exceeds EUR 1,300,000; the treaty covers wealth tax
  • Holding-period discounts and timing of sale: whether the sale occurs before or after change of residence alters treatment under both laws
04

Residence, succession and end of ten years: critical milestones

Oleh status fixes nothing: treaty residence is contested, the exemption period expires, and France retains succession rights.

  • Risk of dual residence if a home, activity or center of economic interest remains in France: successive treaty article 4 criteria (permanent home, center of vital interests, habitual residence, nationality) resolve ties with documentary support
  • Departure from France may trigger the exit tax of article 167 bis of the French tax code; absent a collection assistance clause in the 1995 treaty, deferral toward Israel is not automatic and requires an election, security, and a tax representative
  • Succession: no Franco-Israeli succession treaty; an heir remaining in France at least six out of the preceding ten years is taxable in France on worldwide assets received (CGI art. 750 ter, 3°)
  • End of ten years: shift to worldwide Israeli taxation; sales, portfolio restructuring and gifts merit planning before the deadline, based on a written calendar
— 03

Our approach

The firm advises in French tax law for families and business owners in aliyah or already Israeli residents: mapping French-source income and taxation during the exemption period, securing treaty fiscal residence, handling real property disposals (article 244 bis A, tax representative), wealth tax, exit tax and succession planning under article 750 ter. Matters of Israeli law (entry into oleh status, Israeli declaration obligations, end of period) are handled with Israeli counterparts, under unified coordination.

  • Oleh hadash
  • Aliyah
  • France-Israel treaty
  • Non-residents
  • CGI art. 197 A
— FAQ

Oleh status and French income: your questions

Does the ten-year Israeli exemption eliminate French tax on my French-source income?

No. The olim hadashim regime exempts Israeli tax only, and only on foreign-source income. French-source income (rental, dividends, real property gains) remains subject to French tax under the non-resident regime; the 31 July 1995 treaty assigns its taxation broadly to France. The Israeli exemption has a perverse effect: with no Israeli tax collected, there is no Israeli tax to credit French tax against, making French tax a permanent charge.

How is my French rental income taxed once I am established in Israel?

Rental income from French real property remains taxable in France (treaty article 6). It is subject to income tax at a minimum rate of 20% up to EUR 29,315 of net taxable rental income (2024 income, threshold updated annually) then 30% above (CGI art. 197 A), unless electing the average rate when more favorable, plus social levies of 17.2%. The reduced 7.5% rate applies only to affiliates of EU, EEA, Switzerland or UK social security schemes: an Israeli resident does not qualify.

What withholding applies to my dividends from French corporations?

For an individual Israeli resident, the French withholding is 12.8% (CGI art. 119 bis, 2 and 187), below the treaty cap of 15% set by article 10: so the domestic rate applies. The treaty rate of 5% applies only to corporations holding at least 10% of the distributing company. During the Israeli exemption period, this withholding allows no offset in Israel and is the final tax cost of the dividend.

Can I be considered a tax resident of both France and Israel at the same time?

The risk exists, especially if aliyah leaves in France an owned home, an activity or material assets. Each country first applies its domestic law (in France, article 4 B of the tax code), then treaty article 4 resolves dual residence by successive criteria: permanent home of habitation, center of vital interests, habitual residence, nationality. Position is built from factual elements (actual family settlement, schooling, bank accounts, asset management). A poorly documented Israeli residence invites worldwide French taxation, independent of oleh status.

What happens at the end of the ten years, and when should I plan for it?

At expiration, the Israeli resident becomes subject to Israeli tax on worldwide income, including French income; double taxation is then handled by the treaty. Structural decisions (asset sales carrying unrealized gains, portfolio reorganization, gifts to children by residence country) should be modeled before the deadline, ideally in year eight. For persons becoming Israeli residents from 1 January 2026, the 2 April 2024 reform adds the obligation to declare foreign income and assets from the start of residency, ending the declaration exemption.

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