Israel Tax Highlights - 2015 

Tax Rates|Dividends|Treaty 

Dr. Avi Nov, Adv. 

January 2015 

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

Corporate Tax

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

Dividend Tax
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%) 

Tax Treaty

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.
 

Rental Income
Israeli rental income (residential only) of up to NIS 5,070 per month is exempt from tax.

Trust Law

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.  

See also:

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

 

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