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Last update - 02:30 23/11/2007

Rights of return

By Barr Hayoun

Once upon a time, Israelis seeking their personal fortune abroad were considered traitors. But time passes, circumstances change and today, if anything, they are widely admired for their grit and drive. However, one of the things they've left behind is fear of a brain drain.

When we look at the figures, concern is justified. It turns out that 700,000 Israelis are living outside the country. It transpires that 25,000 hi-tech personnel have abandoned the Holy Land for electronics and software companies in the U.S. in the past seven years. Every year, some 18,000 Israelis emigrate and 2,000 to 5,000 Israelis return. (Immigration to Israel is about 21,000 a year these days.)

Those who return are not always that pleased with the outcome, either. The Ministry of Immigrant Absorption conducted a broad survey in 2006 and found that most Israelis returning from a long stay abroad report a serious slump in their satisfaction. A whopping 73 percent said they had been satisfied with life abroad and only 52 percent liked the outcome of their return. Almost 60 percent said they will stay, but 28 percent said they had not made up their minds and 13 percent said they were actively considering decamping again.

"Ironically, it's harder for expatriates to adjust back to Israel upon return than it was for them to adjust after leaving," says Israel Fruman, managing director of ORI, which supplies human resources and global relocation services. He sees a side-effect, too, namely that when Israeli expats come back home, they tend to leave their employer within two years.

The Immigrant Absorption Ministry found that among the elements most dismaying to returning expats are the high levels of tax in Israel, the heavy outlay on health insurance and difficulty finding work. But as Israel turns 60, the ministry has some ideas of how to change all that. The government wants the boys and girls back home, and if pure patriotism to the tune of an accordion playing "Hava Nagila" won't work any more, the keyword is - incentives.

The state's special offer is in force from November 1, 2007 to August 31, 2009, and it applies to "returning residents" - Israelis aged 17 or over who have been abroad for at least two years and have not spent more than four months a year total in Israel during that time. The government has earmarked NIS 150 million to lure expats back home by, essentially, subsidizing their taxes for a while and helping them find jobs. Scientists and doctors are being offered research grants. The Immigrant Absorption Ministry is willing to bend over backwards to bring the brains back home.

Ministry Director General Erez Halfon thinks that about 15,000 expats in the U.S. and Europe will take advantage of the campaign.

Israel Halberstein runs a Web site, toshav-hozer.co.il, which is devoted to things that returning Israelis need to know. Many are surprised to learn that it takes months for eligibility for National Insurance Institute and medical insurance to kick in. An Israeli who spent more than two years abroad and did not maintain monthly payments to the NII has to wait two months for each year spent abroad in order to receive eligibility, Halberstein explains.

The minimum wait is four months and the maximum is 18 months. However, returning residents can truncate the wait to six months by paying NIS 8,730 to the NII up front. That restores their eligibility for social security stipends to six months rather than 18 months.

It is a good idea to be both eligible for NII and full health care services upon one's return - by preparing the groundwork at least six months in advance.

Aware of this unhappy situation, the ministry is offering to cover that payment for returning Israelis during the period of the campaign. Well and good, but to assure eligibility, once again it's best to begin the process at least six months before your return.

(By the way, returning residents are spared the wait faced by non-returning Israelis before they are eligible for the full range of health services after switching from one kupat holim provider to another.)

Until now, Israelis returning after less than six years abroad could get tax exemptions on household goods and work tools, but not on electric appliances. By the end of December the list of tax-exempt items is expected to increase.

At present, Israelis who do not have returning resident status must pay 29.4 percent tax (customs and VAT), on appliances such as dishwashers, refrigerators, freezers, microwave ovens, washing machine or stoves unless they were purchased in a state that has a tax treaty with Israel (the U.S., Canada or European Union members). In that case the tax rate drops to 15.5 percent, the present level of VAT.

The ministry is also considering introducing income tax incentives. Until now, returning residents were entitled to a five-year exemption, but only on passive income from assets acquired abroad, such as interest, stock dividends, royalties or rental income from property overseas. But many Israelis who come home continue to run a business abroad, and wind up paying double taxes, in Israel and abroad too. So the tax break is being expanded to include all types of income, as long as the company in which the returning resident is a partner is not an Israeli one.

A 2005 Immigrant Absorption Mnistry study found that 46 percent of Israelis living abroad cite job security as a barrier to returning, superseding schooling for the kids and housing as the main concern. The ministry therefore began working with employers to help locate jobs for Israelis abroad before their return.

In exchange for the employers' cooperation, the state finances up to 70 percent of the minimum wage for the returning Israelis that they hire, for a period of one year. The companies undertake to retain the new hire for at least two years. About 20,000 jobs have been earmarked for returning Israelis under this scheme, and the ministry expects more firms to sign on. The companies in question include Unilever, Teva, the five big banks, all the Health Maintenance Organizations and some manpower companies. Participating employers keep the ministry informed about job openings and begin the hiring process even before the candidate arrives in Israel.

The ministry has also launched a program to pay half the salaries of physicians and biotechnology researchers who return from abroad and are hired by hospitals or companies located in the Galilee or the Negev. For now, there are openings for only 10 scientists and four doctors, but if the program is successful it may be expanded. The salaries will be NIS 210,000 a year for the scientists and NIS 180,000 for the physicians. There are also plans for hiring doctors and researchers in the public service, universities and colleges, hospitals and more, again with ministry support for their salaries.

Other ministry assistance for returning residents includes reimbursement of test fees for professional licenses and assured income of NIS 1,200 a month for three months. It also provides vouchers worth up to NIS 10,000 for professional training courses.

While on the subject, returning Israelis can get discounts of up to 30 percent for their return flight on El Al Airlines as well as more generous luggage allowances, through the local Israeli consulate. The Israel Defense Forces gives returning Israelis who have been abroad for between two and five years a six-month exemption from reserve duty. After a five-year absence, the returnee can apply for a one-year exemption. Returning Israelis who are unemployed can get a 90-percent discount for children aged 3-4 at municipal and registered private kindergartens.