GSL / International Taxation / Israel

Israel tax system - taxation of Israel companies and individuals: VAT, income tax and capital gains. Tax treaties of Israel.

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Taxes of Israel

Сorporate tax
Capital gains tax
15/30% (dividend), 23% (interest), 23% (royalty)
Withholding tax
Exchange control

Basic taxes (briefly)

Personal tax
Corporate tax (in detail)
Corporate income tax rate is 23%
Capital gains tax. Details
Capital gains from the sale of shares is taxed at the rate of 25% if there is no control. Otherwise the rate of 30% applies
VAT. Details
Export of goods and certain services, and some other transactions are taxed at a zero rate, and some transactions are exempt from tax
Other taxes
Real estate tax, land value increment tax, exit tax, employers’ national insurance contributions
Government fee
Stamp duty

Taxation of individuals

Individuals are taxed at graduated rates of up to 47%.

Additionally, a 3% surtax applies on annual taxable income exceeding ILS 721 560, resulting in a 50% maximum income tax rate.

The following rates apply to income:

  • up to ILS 84 120 – 10%;
  • from ILS 84 120 to ILS 120 720 – 14%;
  • from ILS 120 720 to ILS 193 800 – 20%;
  • from ILS 193 800 to ILS 269 280 – 31%;
  • from ILS 269 280 to ILS 560 280 – 35%;
  • from ILS 560 280 to ILS 721 560 – 47%;
  • over ILS 721 560 – 50%.

Income tax

A legal entity resident in Israel is imposed with the Israeli corporate tax on its worldwide income, whereas a non-resident legal entity is imposed with the Israeli corporate tax only on income accrued or received in Israel.

In 2023, the corporate tax rate is 23%.

Capital gains tax

Capital gains from the sale of shares is taxed at the rate of 25% if there is no control (if it is received by a non-controlling shareholder, i.e. a shareholder who owns less than 10% of shares of the Israeli company). Otherwise the rate of 30% applies. Profit from the sale of bonds, commercial securities or credits that are not tied to the Consumer Price Index (CPI) is normally taxed at a 15% rate.

The tax rate on income received from capital gains when selling other assets varies from 20% to the marginal personal income tax rate depending on the kind of the asset and date of its acquisition.

Value-added tax

The current VAT rate is 17%.

Export of goods and certain services, and some other transactions are taxed at a zero rate, and some transactions are exempt from tax.

Withholding tax

Israel has set extensive requirements regarding withholding tax at source, according to which almost any payment sent abroad results in tax withholding.

For example, dividends are taxed at source at the rate of 15% to 30%, and interest paid to a foreign corporation is taxed at source at the corporate tax rate (currently, 23%). These rates may be reduced in accordance with the applicable double tax agreement.

Moreover, withholding tax may apply to certain payments for services provided to non-residents, especially if the services are provided in Israel.

Real estate tax

Real estate tax is normally imposed on owners of commercial and residential real estate. Tax on unoccupied property is usually collected from the owner of the property. Tax is imposed at the municipality level.

Stamp duty

Stamp duty is not imposed in Israel.

Land value increment tax

Land value increment tax applies to income from the sale of Israeli real estate. This tax is also imposed on the sale of interest in a non-traded real estate association (REA) defined as a company or partnership whose main assets consist of Israeli real estate.

Exit tax

When an Israeli tax resident ceases to be an Israeli resident for taxation purposes, the individual’s assets are deemed to have been sold one day before the individual ceases to be an Israeli resident.

Any profit related to a deemed sale of assets may be paid on the day of termination of residency or may be postponed until the date of the actual sale of the assets.

National insurance contributions

Employers must monthly pay national insurance contributions amounting to one percent of the income of each employee. Employers are responsible for the deduction of employees’ contributions from the salary and their transfer along with their own contributions. The rate of an employer’s contributions for employees resident in Israel is 3,55% where the monthly income is up to ILS 7 122 and 7,6% of the difference between ILS 7 122 and the maximum monthly income of ILS 47 465.

Controlled foreign company rules

In accordance with the controlled foreign company rules in the Israeli tax law, an Israeli individual may be taxed on their share in undistributed profits of certain non-resident companies controlled by Israeli tax residents where the Israeli shareholder holds a controlling stake (10% of shares or more).

Transfer pricing

The Income Tax Ordinance (ITO) and the regulations promulgated thereunder contain detailed provisions on transfer pricing, including the arm’s length principle, which apply to any international transaction where there is a special relationship between the parties to the transaction.

The rules are generally based on the international principles of transfer pricing (rules of the Organization for Economic Cooperation and Development / OECD). These rules usually require the taxpayer to confirm the pricing of international transactions with a transfer pricing analysis, intercompany agreements and other documents. In accordance with decrees of the High Court of Israel, the conditions of a transaction between related parties must be set in written contracts.

International tax agreements

Israel has entered into 55 double tax agreements (DTAs) with the following jurisdictions:

Azerbaijan, Austria, Great Britain, Belarus, Latvia, Belgium, Poland, Brazil, Bulgaria, Canada, China, Croatia, the Czech Republic, Denmark, Estonia, Ethiopia, Finland, France, Georgia, Germany, Greece, Hungary, India, Ireland, Italy, Jamaica, Japan, Korea, Lithuania, Luxembourg, Macedonia, Malta, Mexico, Moldova, the Netherlands, Norway, Panama, the Philippines, Portugal, Russia, Romania, Singapore, Slovakia, Slovenia, the USA, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, Ukraine, Uzbekistan, Vietnam.

In addition, Israel has signed and ratified the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and profit Shifting (MLI). The multilateral convention came into force for Israel on 1 January 2019.

Foreign exchange controls

There are no foreign exchange controls in Israel.

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