Tax in Israel

Who is the tax authority?

The Israel Tax Authority (ITA — Rashut HaMisim) administers Israeli tax under the Ministry of Finance. It was established in 2004 by merging the Income Tax Department, the Customs and VAT Department, and the Property Tax Department.

The ITA administers the Income Tax Ordinance (5721-1961), the Value Added Tax Law (5736-1975), the Real Estate Taxation Law, and allied statutes. The Tax Tribunal and the Supreme Court of Israel handle disputes on appeal. The Institute of Certified Public Accountants in Israel (ICPAI — Lishkat Ro'ei HaHeshbon) regulates certified public accountants; the Israel Bar Association regulates tax-litigation practitioners through its Tax Forum.

Taxpayers access services through the portal at gov.il/en/departments/israel_tax_authority. District tax offices (Lishkot HaMisim) handle in-person interactions across Israel's administrative regions.

What is the tax year and when are returns due?

Israel's tax year is the calendar year (1 January to 31 December). Most salaried employees are not required to file an annual return; employer withholding (Mas Hachnasa B'Makor) and source-withholding on investment income cover them. Individuals required to file — the self-employed, those with foreign-source income, those with capital gains above thresholds — submit the annual return by 30 April of the following year, with an online-filing extension to 31 May.

Self-employed individuals and companies make monthly Mikdamot (advance-payment) instalments throughout the year. Corporate annual returns are due within five months of the fiscal year-end, with extension options. Ma'am (VAT) returns are filed bi-monthly for most operators and monthly for larger ones.

Who counts as an Israeli tax resident?

Israeli tax residency is determined by the centre-of-life test (mivchan merkaz hachayim) under Section 1 of the Income Tax Ordinance — the place where the individual's life is centred, considering family, economic, and social ties. Two rebuttable presumptions apply: an individual is presumed resident if present in Israel for 183 or more days in the tax year, or if present for 30 or more days in the tax year and 425 or more days across the current year and the two preceding years (the rolling-3-year test).

Residents pay Israeli tax on worldwide income; non-residents pay tax on Israeli-source income only. The 2003 Rabinovich Reform introduced the worldwide-residency basis that applies today.

The Olim Chadashim (new immigrants) regime under Section 14 of the Income Tax Ordinance provides a 10-year exemption from Israeli tax on most foreign-source income — including foreign-source capital gains, interest, dividends, and pension income — for new immigrants. A parallel regime (Toshavim Chozrim Vatikim) applies to long-term returning residents. Departure from Israel can trigger exit tax on unrealised gains under Section 100A of the Income Tax Ordinance.

What are the personal income tax rates?

Mas Hachnasa (personal income tax) uses a six-bracket progressive structure for active income (employment, business, professional). The 3% Mas Yesef surtax applies on annual income above approximately ILS 721,000, producing a combined 50% top marginal rate.

Passive income faces lower flat rates: interest at 25% (15% on inflation-protected bonds), dividends at 25% (30% for substantial shareholders), and most capital gains at 25% for non-substantial shareholders (30% for substantial shareholders). Bituach Leumi (National Insurance) and Bituach Bri'ut (Health Tax) apply on top of income tax — roughly 4–7% and 3.1–5% respectively, each with caps and progressive structures.

How does corporate tax work?

Israel's corporate income tax (Mas Hevra) is 23% on taxable profits — the rate in effect since 2018 following a multi-year reduction trajectory from 25%. There is no separate municipal or regional corporate tax layer.

The Encouragement of Capital Investments Law framework has operated through several iterations — Approved Enterprise, Beneficiary Enterprise, Preferred Enterprise, and now Preferred Technology Enterprise. The Innovation Box provides preferential rates for qualifying intellectual-property income with nexus and substance conditions under the same law. R&D incentives from the Israel Innovation Authority (IIA) operate alongside the tax incentive framework.

What about VAT and indirect taxes?

Ma'am (Mas Erech Mosaf — VAT) is Israel's principal indirect tax. The standard rate rose from 17% to 18% on 1 January 2025 under the post-2024 budget law as a fiscal-consolidation measure.

Registration is mandatory from the start of taxable activity with no threshold (Osek Patur offers a small-dealer exemption for revenue below ILS 120,000 for 2025). Cross-border digital services to Israeli consumers by non-resident vendors are subject to VAT under the digital-services regime introduced in 2016. Excise duties apply on alcohol, tobacco, fuel, and motor vehicles.

How are cryptoassets taxed?

The ITA's published guidance treats cryptoassets as financial assets. Individual gains on disposal are subject to the 25% capital-gains rate (30% for substantial shareholders). Mining and staking rewards are taxable as ordinary income on receipt at fair market value.

Receipt of crypto as compensation is taxable at fair market value on receipt under the standard PAYE framework. Disposals include not only sale for fiat but also exchange between different cryptoassets, payment for goods or services, and DeFi-lending activities triggering beneficial-ownership transfer.

What is Israel's treaty network?

Israel maintains approximately 60 comprehensive Double Taxation Conventions in force covering principal trading partners across Europe, North America, and Asia. Most treaties follow the OECD Model with Israeli reservations on the credit-versus-exemption method — Israel generally applies the credit method. The 1975 US-Israel convention (as amended by 1980 and 1995 protocols) is the headline agreement.

Israel signed and ratified the OECD Multilateral Instrument (MLI); the MLI's modifications including the Principal Purpose Test apply to many of Israel's covered conventions from 2019 onward. Sections 199–207 of the Income Tax Ordinance govern foreign tax credits. The CFC regime under Section 75B of the Income Tax Ordinance operates as an anti-deferral mechanism alongside the treaty network.

Where does Israel sit in the regional cohort?

Israel anchors the OECD tech-export cohort alongside South Korea, Singapore, and the Netherlands — advanced economies whose industrial-policy tax regimes (R&D incentives, IP boxes, reduced CIT for high-tech manufacturing) are structurally similar. The Middle East and North Africa tax landscape spans 5 distinct archetypes:

Common pitfalls for arrivals and multinationals

Six recurring traps catch foreign individuals and companies operating in Israel:

When should you talk to an Israeli tax pro?

Some situations are straightforward enough to handle through the ITA portal. Others carry enough complexity to warrant a qualified yo'etz mas (tax pro) registered with the ICPAI or Israel Bar:

• You are a new immigrant (Oleh Chadash) and want to elect into the 10-year foreign-income exemption under Section 14 of the Income Tax Ordinance
• Your income exceeds the Mas Yesef surtax threshold (~ILS 721,000 in 2024)
• You hold foreign entities, foreign pensions, or foreign trusts — Israeli trust-regime rules are complex
• Your company is applying for Preferred Enterprise or Preferred Technology Enterprise status under the Encouragement of Capital Investments Law
• You are a multinational group with consolidated revenue above EUR 750 million and need Pillar Two compliance from 2026
• You are departing Israel and want to assess the Section 100A exit-tax exposure
• You received an ITA audit notice or tax assessment (Sheuma) and need to respond
• You have cryptoasset disposals, staking income, or DeFi activity above small amounts

You can find vetted Israeli tax practitioners through the directory below.

This page is general information. It is not personal guidance for your specific situation. Tax rules change. Always verify current figures on the ITA website (gov.il) or with a licensed Israeli practitioner before filing.