4. Business income

According to the current situation, during the first 4-year period starting as of the arrival date, new immigrants are tax-exempt on their business income deriving from business that was conducted outside of Israel, for at least five consecutive years, prior to their arrival to Israel (Hereinafter- old business).

According to the reform, during the first 10-year period starting as of the arrival/returning date, new immigrants and "senior returning residents" would be tax exempt on business income deriving from business conducted outside of Israel, as well as within Israel.

5. Adaptation period

According to the current situation, an Israeli resident is tax liable in Israel on his worldwide income, and a non- Israeli resident is tax liable in Israel only on income generated in Israel.

According to the reform, new immigrants and "senior returning residents" would be entitled to a 1-year adaptation period in which they would not be considered as Israeli residents, provided that they notify the Israeli Tax Authorities upon this request during the first 90-day period starting as of the arrival/returning date.

6. Foreign corporations controlled and managed by new immigrants and "senior returning residents"

According to the current situation, an Israeli corporation is defined as which if it is controlled and managed form Israel.

According to the reform, corporations managed and controlled by new immigrants or "senior returning residents" would not be considered as Israeli corporations; and therefore would not be taxable in Israel other than on income generated in Israel.

7. Exemption on income tax filings

According to the reform, during the first 10-year period starting as of the arrival/returning date, new immigrants and "senior returning residents" are exempt from filing tax reports to the Israeli Tax Authorities when foreign income or foreign assets are concerned.

Upon the government's approval, the above reform would be brought to the approval of the Knesset during the following Knesset session, and would apply as of January 1st 2008.

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