Accountancy in Israel

>> Taxation in Israel

For Israeli tax purposes, an Israeli resident is defined as an individual whose center of living is in Israel taking into account the person’s family, economic and social links.

An important presumption will apply in either the following circumstances:

  • The individual is present in Israel at least 183 days in a tax year ending 31 December,
  • The individual is present in Israel at least 30 days in the current tax year, and 425 days cumulative in the current and two preceding tax years.

The centre of living test is based on the following criteria:

  • Location of permanent home
  • Place of residence of the individual and his/her family
  • Place where the individual regularly works or is employed
  • Location of active and material economic interests
  • Place where the individual is active in various organizations, associations or institutions
  • An Israeli resident pays tax on his worldwide income.

The current tax rates are:

Annual income level (NIS) 2018 tax rate
0 – 74,880 10%
74,881 – 107,400 14%
107,401 – 172,320 20%
172,321 – 239,520 31%
239,521 – 498,360 35%
over 498,361 47%

 

Other Income Sources 2018 tax rate
Capital gains 25-30%
Interest 10-35%
Dividends 15-30%
Inheritance None

Income above ILS 641,880 is subject 3% surtax.

National insurance

Additionally, self-employed individuals pay between 5.97%-17.83%.

National insurance payments include the Health Tax payments that cover HMO payments and hospital costs.

VAT

VAT current rate is 17%. There is a transaction at zero rate VAT or that are exempt from VAT. Among such transactions are selling intangible assets and services to foreign residents, services and hotel costs for tourists, fruits and vegetables and residential rentals for a period less than 25 years.

 

up to 5,944 monthly salary 5,944 – 43,370 monthly salary
Employee’s share 3.45% 12.00%
Employer’s share 3.45% 7.50%

Additionally, self-employed individuals pay between 5.97%-17.83%.

National insurance payments include the Health Tax payments that cover HMO payments and hospital costs.

Corporate tax

Current rate of corporate tax is 23%. Dividends between corporates are tax free. Dividends to a private shareholders are taxed at 25% however dividends to shareholders of 10% or more of the company’s capital are taxed at 30%. At this rate the corporate tax plus tax on dividends equals to the highest rate of income tax.

New immigrants and returning citizens

New immigrants and returning citizens are exempt for 10 years on reporting and paying tax on income that its source is outside Israel.

Foreign residents’ taxation in Israel

The territorial tax regime still applies for foreign residents in Israel. A foreign resident will pay tax on his business and capital income that were generated in Israel subject to tax treaties.

As from 2009 there are exemptions on Israeli income earned in Israel by a foreign resident among them are:
Interest, discount fees, and index income on corporate bonds. Capital gains on nonmarketable securities and capital gains on marketable securities.


Latest version updated 4th April 2019

Country Breakdown

8.7

Million

Population

?

Israeli New Shekel

Currency

$ 318.7

Billion

GDP

20,770

km2