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Tax rates in Israel

Tax Rates

Consumption Taxes

Nature of the Tax
VAT - (MA'AM in Hebrew)
Tax Rate
17%
Reduced Tax Rate
Certain items are zero-rated, including exports of goods; supplies of intangibles to foreign residents; supplies of services to foreign residents, subject to broad use and enjoyment restrictions; hotel accommodation for tourists; leasing private cars to tourists;  tourist transportation; supply of monitor services, as well as inspection and coordination services, with regard to clinical trials conducted in Israel.
Not-for-profit organisations pay VAT-equivalent tax (payroll tax) at the rate of 7.5% of their total payroll. The rate is 17% for financial institutions.
Other Consumption Taxes
Purchase tax on the purchase of real estate (0-10% for the first residential property owned in Israel; 8-10% if real estate is an additional residential home or 0.5-5% for Jewish making their "Aliyah"), municipal tax, land betterment tax (varies depending on purchase date).
Certain goods are subject to excise taxes (including gasoline and diesel fuel used for transportation, tobacco, and alcohol) at different rates.
Not-for-profit organisations pay VAT-equivalent tax (payroll tax) at the rate of 7.5% of their total payroll. The rate is 17% for financial institutions.
A luxury tax is levied on the purchase of certain yachts and luxury cars.
There are no stamp duties in Israel, nor net wealth tax or net worth tax.

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Corporate Taxes

Company Tax
23%
Tax Rate For Foreign Companies
Resident companies, or companies incorporated in Israel or managed and controlled in Israel, are taxed on worldwide income and capital gains, while non-resident companies are only liable to Israeli taxes on income originating in Israel.
Capital Gains Taxation
The real gain is generally subject to tax at the corporate tax rate applicable in the year of the gain (23% in 2023). The inflationary component of a gain accrued as from 1 January 1994 is exempt from tax. An Israeli resident is subject to capital gains tax on the disposal of its assets, regardless of whether the assets are located in Israel. Capital gains derived from the sale, exchange, transfer or other disposition of tangible and intangible capital assets located in Israel are treated as Israeli-source income and are subject to capital gains tax. Those who are not residents of Israel for tax purposes are exempt from capital gains tax on gains from the sale of shares traded on the Tel Aviv stock exchange unless the gain is attributable to a permanent establishment of the foreign seller in Israel. Exemptions apply to gains derived by non-residents from the sale of securities in Israeli or Israeli-related companies acquired on or after 1 January 2009 (the exemption is subject to certain ownership conditions).
Main Allowable Deductions and Tax Credits
Expenses incurred wholly and exclusively in the production of income are generally tax-deductible.
Generally, pension fund contributions made to recognised funds are deductible for the employer, provided they are not above a certain level and are made regularly. Interest expenses incurred in the production of taxable income are normally deductible. Provisions for bad debts are deductible in the year in which it is evident that the debt has become irrecoverable.
Goodwill purchased may be amortisable over a ten-year period (10% per year). Donations of at least ILS 200 (for 2023) to approved state or charitable institutions within a tax year are eligible for a tax credit. The amount of the credit is calculated by multiplying the contribution amount by the corporate tax rate applicable during that year. However, the credit amount cannot exceed the lower of two options: (i) 30% of the corporation's taxable income for the year, or (ii) ILS 10,019,808 (in 2023). Any unused tax credits can be carried forward for up to three years, subject to specific regulations.

Business losses can be offset against income from any source in the same year. Losses may be carried forward and set-off without a time limit against income from any trade or business or capital gains arising in the business (but not against income from any other source), whereas loss carrybacks are not allowed.
Payments of interest, royalties, and management fees to foreign affiliates are deductible (conditions apply).

Tax and cash incentives are provided for companies that qualify for the "Preferred Enterprise (PFE) regime", generally those who contribute to the development of the productive capacity of the economy, absorption of immigrants, creation of employment opportunities, or improvement in the balance of payments. The "Special Preferred Enterprise (SPFE) regime" applies to certain large corporations that can demonstrate their great contribution to the Israeli economy. Another regime is that of "Preferred Technology Enterprise", for companies engaged in the technology sector and that are part of a group of companies with aggregate annual revenues less than ILS 10 billion, among other conditions.
Other Corporate Taxes
Municipalities levy an annual tax on buildings, based on the size, location, and purpose of the property. Property taxes are generally imposed at the municipality level on the occupier of commercial and residential real property. Unoccupied property is generally taxed on the property's owner.
Capital gains on real estate are subject to the land appreciation tax law. The tax rate on the real gain is the applicable corporate tax rate (23% in 2023).

All property purchase is subject to tax, at rates varying between 0% and 10% depending on the status of the buyer (Israeli citizen, foreign resident in the process of obtaining Israeli citizenship, foreign citizens making Aliyah), the number of properties held (one or multiple) and the value of the real estate. The highest rate applies when the purchase price exceeds ILS 19,575,755.

Social security contributions paid by the employer for Israeli-resident employees are 3.55%, up to a monthly income of ILS 7,122 and 7.6% on the difference between ILS 7,122 and the maximum monthly income of ILS 47,465. For non-resident employees, lower rates apply: 0.59% up to a monthly income of ILS 7,122 and 2.65% on the difference between ILS 7,122 and the maximum monthly income of ILS 47,465.

Non-profit organizations are subject to a tax of 7.5% of payroll in lieu of VAT. A similar tax is levied on financial institutions, at a rate of 17%.

Other Domestic Resources
Israel Tax Authority

Country Comparison For Corporate Taxation

  Israel Middle East & North Africa United States Germany
Number of Payments of Taxes per Year 6.0 20.8 10.6 9.0
Time Taken For Administrative Formalities (Hours) 234.0 204.0 175.0 218.0
Total Share of Taxes (% of Profit) 25.3 32.1 36.6 48.8

Source: Doing Business, Latest available data.

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Individual Taxes

Tax Rate

Personal income tax rates Progressive rates from 10% to a maximum of 50% with tax credit points to reduce payable taxes.
NIS 1 to 81,480 10%
NIS 81,480 to 116,760 14%
NIS 116,760 to 187,440 20%
NIS 187,440 to 260,520 31%
NIS 260,520 to 542,160 35%
NIS 542,160 to 698,280 47%
Over NIS 698,280 50% (including the 3% surtax)
Annual tax for passive income (i.e. business rentals) 31% to 47%
From ILS 1 to 260,520 31%
From ILS  260,520 to 542,160 35%
Above ILS 542,160 47%
Allowable Deductions and Tax Credits
Tax deductions are grantedfor life insurance premiums and pension fund contributions.
Residents are entitled to personal tax credits against their tax liabilities according to their status. Each point is worth ILS 235 per month, with resident individuals being entitled to a minimum of 2.25 points. Additional points are granted for dependent children, new immigrants, and single-parent families.
New immigrants and returning residents (who were foreign residents for a continuous period of at least ten years and returned to Israel to become an Israeli tax resident after such period) may enjoy tax benefits upon becoming tax resident in Israel.
Mortgage interest and medical expenses are not deductible. A tax credit of 35% may be granted for charitable contributions (up to 30% of annual taxable income or ILS 10,019,808, whichever is less). Tax credits and deductions are granted for payments for life insurance premiums and to provident and pension funds (conditions apply). Subsistence expenses for work-related travels out of town or abroad may be deducted under certain conditions.
For self-employed individuals and certain employees, contributions to an approved provident fund and a training fund are deductible (ceilings apply).
Special Expatriate Tax Regime
Israeli residents have to pay personal income tax, social security tax, health tax and capital gains tax on a universal basis. Non-residents are taxed on incomes received in Israel at the same rates as residents (though social security contributions vary, see the above section). The health insurance tax is not levied on non-residents.
"Approved specialists" are foreign experts that are appointed by the Investment centre to perform jobs or provide skills that Israeli residents cannot offer. They are subject to a maximum income tax rate of 25% for three years (with a possible extension of up to five years). Foreign residents are exempted from taxes on capital gains resulting from share investments in the Tel-Aviv Stock Exchange.
New immigrants and returning residents may enjoy several tax benefits upon becoming tax-resident in Israel. For more details consult the website of the Government of Israel.

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Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed
Israeli Tax Treaties
Withholding Taxes
Dividends: no withholding tax is payable on dividends distributed by an Israeli resident company to another Israeli company, provided the dividends arise from income produced or accrued in Israel by a company that is subject to corporate income taxation. Dividends paid to an Israeli resident individual generally are subject to withholding tax at 25%. A 30% rate applies in the case of a ‘substantial shareholder’, which is, in general, a shareholder that holds 10% or more of the rights of the company. Dividends paid to a non-controlling foreign resident company or individual are subject to a 25% withholding tax.

Interest: 23% for interest payments to a resident or non-resident recipient that is a “body of persons”/Interest paid to a resident individual: 20% on interest paid by a provident fund; 25% on bank interest; 35% on interest paid on debentures or government bonds issued before 8 May 2000 (conditions apply); 47% where the recipient of the interest at the time of receipt of the interest or at any time during the preceding 12 months held at least 10% of the shares of the payer, is an employee of the payer, or provides services or sells products to the payer.

Royalties: payments made to resident entities and individuals are subject to withholding tax at 20% where the recipient can demonstrate that it maintains books of account and has filed returns; otherwise, the rate is 30%. Payments to non-resident companies: 23%. Payments to non-resident individuals: 25%.

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Latest Update: February 2024