Dr. Avi Nov, Adv.
The Israeli tax system is frequently changing. There were various amendments to the Israeli Tax Code and many to come soon and in 2016. The following summarizes Israeli tax rates and other tax information for 2015.
For past years, see: Israel Tax Highlights.
See also: Proposed Tax Changes for 2016
The standard corporate tax rate in Israel for 2015 is 26.5% (planned to be reduced to 25% IN 2016). However, "preferred income" derived by certain industrial and technology enterprises, in accordance with the Law for Encouragement of Capital Investments, is liable to reduced corporate tax 16% in the center of Israel, or 9% in development area A, without any time limit.
See also: Tax breaks for multinational firms
The regular dividend tax rate is between 30%- 32% for shareholders that hold 10%-or-more in the company that pays dividends, and 25%-27% for other shareholders. These rates are all subject to any applicable tax treaty signed by Israel. However, dividend distributed from a company that has "preferred income", would be taxed at 20% (instead of 25%-32%)
Israel and Germany signed a new tax treaty, in Berlin, on 21 August 2014 that will replace the Israel - Germany Income Tax Treaty of 1962. The new Israel and Germany tax treaty generally follows the OECD Model. The new Israel and Germany tax treaty provides lower withholding tax rates.
See: Tax Treaty between Germany and Israel
Value Added Tax
The standard Israeli Value Added Tax (VAT) rate is 18% (planned to be reduced to 17% in October 2015).
Personal income tax
In 2015, the tax rates in Israel for employment and freelance income are as follows:
10%: 0 – 63,360 NIS
14%: 63,361 – 108,120 NIS
21%: 108,121 – 168,000 NIS
31%: 168,001 – 240,000 NIS
34%: 240,001 – 501,960 NIS
48%: 501,961 – 811,560 NIS
52%: Over 811,560 NIS
See also: Israeli Tax Reporting Rules
In contrast to the above income tax rates, flat rates of tax generally apply to dividends, interest and capital gains derived by individuals:
· 25%-27% tax if the recipient holds under 10% of the payer;
· 30%-50% tax if the recipient holds 10% or more of the payer.
Israeli rental income (residential only) of up to NIS 5,070 per month is exempt from tax.
Starting on January 1, 2014, the Israeli Tax Authority will tax any trust anywhere in the world that has an Israeli resident beneficiary. It is likely that many previously Israeli tax exempt trusts will be subject to significant Israeli income tax liability.
Changes in Israeli Taxation of Trusts
The Israeli 2013 Economic Arrangements Bill
Israeli new Tax Rules Proposed – Part I
Dr. Avi Nov Law Offices, Israeli & international tax law
*This article is intended for informative purposes only and is in no way to be construed as tax advice or a legal opinion