Last partial update, June 2024.
The tax system in Israel:
Israel's tax laws took a major change from 1.1.2003.According to Israel's tax reform tax is levied on personal basis, instead of the previous territorial basis, Israelis pay tax on all sources of income, in Israel and abroad.
In 2024 Israel's corporate income tax rate is 23%.
Individual income tax rates in 2024 are 10%-47%.
There are reduced tax rates for passive income, e.g. flat rental and interest.
Taxation of Current Income (Personal Income Tax)
Personal Income Tax (for both the employed and self-employed) is a progressive tax starting at 10% and increasing to a maximum of 47% (at present, on a gross monthly income of about USD 12,000).Allowance points are granted on the tax due which reduces the tax payable (an allowance point is worth approximately $650 a year).
The main allowance points are given in the following table:
| Subject | No. of Allowance Points |
|---|---|
| Israeli resident | 2.25 man / 2.75 woman |
| Child under the age of 18 (allowance to the mother) | 1 |
| Child aged born to 5 | 4.75 father/5.25 mother |
For additional allowances/exemptions, see below under the heading "Tax-Exempt Income".
Israel Annual Income Tax Rates for Individuals (2024)
| Tax % | Income (IS) |
|---|---|
| 10% | 1-84,121 |
| 14% | 84,122-120,720 |
| 20% | 120,721-193,800 |
| 31% | 193,801-269,280 |
| 35% | 269,281-560,280 |
| 47% | 560,281 and over |
Note :The annual tax rates for passive income, e.g. business rental, are:
| Tax % | Income (IS) |
|---|---|
| 31% | 1-269,280 |
| 35% | 269,281-560,280 |
| 47% | 560,281 and ove |
Note: There is an additional 3% surtax for annual income exceeding IS 721,560.
Timing the Payment of Tax
Tax due from an employee is deducted at source by his employer.The employer transfers the tax to the Income Tax on the 15th of the month for the preceding period.
Employers who have a large number of employees report to the Tax Authorities once a month, while employers with a lesser number of employees submit their returns once every two months (thus, for example, a small employer will submit a return for January and February on March 15).
Self employed persons as well as limited companies, pay an advance to the Income Tax on the 15th of the month.
Here, too, businesses that report once every two months on the 15th of the following month are differentiated from larger businesses that submit a return once a month.
Most of the advances for the self-employed/companies are determined by the Tax Authorities according to the figures in the annual return that the business submitted for the previous year. Advances for new businesses are fixed by the Tax Authorities according to the accepted percentage for the sector to which the business belongs.
The system of prepayment of taxes is usually based on a percentage of the total receipts of the business, regardless of the actual expenses that were incurred during the month.
Israel Corporate Tax
Corporate tax, including income tax and corporate tax is fixed at the rate of 23% in 2024.This rate refers to the undistributed profits of the corporation.
In certain cases, a reduced rate of tax is payable or an exemption granted, mainly to certain industrial companies defined as "approved enterprises", as will be specified below.
Israel Social Security
Social security payments are subject to a monthly ceiling of 49,030 in 2024The top rates are:
- Employer - 3.55%-7.6%
- Employee - 3.5%-12%
- Self employed pay 5.97%-17.83% on monthly income up to IS 45,075.
Israel Tax Withholding
The tax withholding rates for payments to non-residents are:- Dividend - 4%/15%/20%/25%/30%
- Royalties - 23%
- Interest - 23%
Israel Amortization/Fixed Assets
Amortization on fixed assets may be deducted from taxable income. The rates of amortization allowable in Israel are as follows:| The Asset | Amortization |
|---|---|
| Top grade stone buildings | 4% |
| Top grade reinforced concrete buildings | 4% |
| Second grade buildings with a less strong structure | 4% |
| Sundry furniture | 6% |
| Furniture for coffee bars, restaurants, etc. | 12% |
| Sundry equipment | 7% |
| Air-conditioners | 10% |
| Machinery and equipment for a building | 20% |
| Vehicles | 15% |
| Trucks, pick-up trucks weighing over 3 tons | 20% |
| Taxis, hire cars | 20% |
| Driving school vehicles | 20% |
| Computers | 33% |
| Goodwill | 10% |
| Professional literature | 15% |
Comment: The above rates are the basic rates.
There are additional benefits for equipment operated on (2 and 3) shifts in industrial companies or hotels.
Note: The information in this site is for general guidance only. Users of this site are advised to take professional advice before taking practical tax decisions.
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