Relocating pensioners: what you need to know about taxes on pensions, rentals, and investments in Israel

For many Israeli pensioners, retirement is the perfect time to relocate — whether to join family abroad, enjoy a milder climate, or find a more affordable and peaceful place to live. Yet with this move comes one of the most critical financial questions: your tax residency.

Two Types of Relocating Pensioners

• Maintaining Israeli residency. These are individuals who continue to spend most of their time in Israel and only spend limited periods abroad. For them, nothing changes in terms of tax status.
• Losing Israeli residency. These are pensioners who no longer meet the legal criteria for residency — for example, selling their Israeli home and car, moving their family abroad, and shifting their “center of life” overseas. In this case, the tax rules change significantly.

Key Social Considerations

• State benefits. Allowances and ashlamat achnasa (income supplement) are available only to Israeli residents. Relocating permanently abroad usually means losing these entitlements.
• Healthcare. Loss of residency also ends access to Israel’s national healthcare system — an especially important factor for retirees.

Taxation of Retirement Income

Pensions.
An Israeli pension paid abroad is considered foreign income and taxed under the laws of the country of residence. In many European countries, such as Bulgaria or the Czech Republic, taxation is straightforward and based on local rules. In Canada, however, the system is more complex: Israel withholds tax first, after which Canadian tax laws apply. According to international conventions, the general principle is clear — pensions are taxed where the retiree is a resident. Still, Israel may continue withholding tax, requiring pensioners to file for a refund. In cases of small pensions, benefit units and partial exemptions (such as kibua zchuyot) can cover the liability.

Rental income.
Rental income is taxed first in the country where the property is located. In Israel, income from rent up to ₪5,500 per month (as of 2025) is exempt. If the income exceeds this threshold, pensioners may choose between a flat 10% tax rate or progressive taxation. For those with no other income, the progressive system is often more favorable. It is also essential to check if additional taxes apply in the country of residence.

Financial income.
For non-residents, tax is charged only on deposits in shekels. Income from deposits in foreign currencies or from securities is exempt from Israeli taxation. To benefit from this exemption, the pensioner must formally update their residency status with the bank. However, this may affect the account relationship — some banks transfer such accounts to branches for non-residents, or even require closure. In light of this, many retirees consider moving their assets to international platforms like Interactive Brokers, which are not Israeli tax agents.

Final Thoughts

Relocating in retirement is not only about lifestyle — in Israel, it carries major tax and social implications. To avoid unpleasant surprises, it is crucial to evaluate how your residency status will change and to plan ahead.

If you are considering relocation or have already made the move, I strongly recommend seeking professional advice from a tax and pension consultant. With proper planning, you can safeguard your rights and optimize your tax obligations while enjoying your new chapter abroad.

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