Tax rates in Israel

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.
A branch is subject to tax at the standard corporate rate on income sourced from Israel. No tax is withheld on transfers of after-tax profits to the foreign head office, provided a withholding tax clearance is obtained from the Israel Tax Authority (ITA).

Capital Gains Taxation

The capital gains tax rate varies based on the asset's purchase date and nature. For corporations, the standard rate is 23%. Profits accrued from January 1, 1994, have an exemption on the inflationary component; a 10% tax applies to profits accrued before this date.
On share sales, undistributed company profits during the seller's ownership period, subject to company-level tax, may be tax-exempt in certain cases.
Israeli resident entities face capital gains tax on asset disposal, irrespective of asset location. Israeli-source income includes gains from tangible and intangible assets in Israel or holding interests in Israeli assets. Shares of Israeli companies or foreign ones with main assets in Israel may also be treated as Israeli assets.
Non-Israeli tax residents are exempt from Israeli capital gains tax on Tel Aviv stock exchange share sales unless linked to an Israeli permanent establishment (PE).
Nonresidents enjoy a broad exemption from capital gains tax on securities in Israeli or related companies acquired after January 1, 2009, except for certain cases like shares primarily consisting of Israeli real estate assets or held through a PE.
Preferred technological enterprises selling qualifying intangible assets to related nonresidents may be taxed at 12% or 6% rates, subject to 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. Research and development (R&D) costs are typically deductible for tax purposes, even if they are considered capital costs.
Goodwill purchased may be amortisable over a ten-year period (10% per year). Donations of at least ILS 207 (for 2024) 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 10,354,816 (in 2024). Any unused tax credits can be carried forward for up to three years, subject to specific regulations.

Business losses can offset income from any source within the same tax year. However, loss carrybacks aren't permitted. These losses can be carried forward indefinitely and used to offset income from the same trade or business or capital gains within the business, but not against income from other sources.
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 2024).

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 20,183,565.

Social security contributions paid by the employer for Israeli-resident employees are 3.55%, up to a monthly income of ILS 7,522 and 7.6% on the difference between ILS 7,522 and the maximum monthly income of ILS 49,030. For non-resident employees, lower rates apply: 0.59% up to a monthly income of ILS 7,522 and 2.65% on the difference between ILS 7,522 and the maximum monthly income of ILS 49,030.

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% (scheduled to be increased to 18% effective January 1, 2025).

Other Domestic Resources

Israel Tax Authority

Tax Rate

Allowable Deductions and Tax Credits

Tax deductions are granted for 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 242 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. Contributions to recognized public institutions qualify taxpayers for a tax credit of 35% on donations totaling at least ILS 207, provided they don't surpass 30% of annual taxable income or ILS 10,354,816, whichever is lower. Unused donation amounts can be carried forward for up to three years in specific situations. 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).

New Israeli residents and senior returning residents qualify for a tax exemption on specific types of foreign-source income for ten years from their immigration or return to Israel. The exemption period for interest income on foreign currency deposits may be extended for up to an additional ten years, subject to meeting certain investment criteria. Returning residents, excluding senior returning residents, are eligible for a tax exemption on certain types of foreign-source income (excluding business income) for five years from their immigration or return to Israel.

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.