Israeli tax rules on depreation 

September 2008 
Dr. Avi Nov, Adv.

This note focuses on the Israel tax rules on deprecation concerning various assets. There are no specific Israel tax rules on intellectual property.

Intellectual property

The existing Israeli tax laws governing tax depreciation, neglect intellectual property assets (other than goodwill and specific assets held by an "Industrial Company”). However, recent court cases point out that intellectual property should be accepted as depreciable assets under the general depreciation rule that allows the depreciation of all asset used to generate business income.


With regard to goodwill, if it was acquired after January 1, 2003, it is possible, in certain circumstances, to deduct the goodwill at the rate of 10% per annum (of the original value). The tax consequences of a sale and acquisition of IP is as follows: The seller of goodwill is subject to tax at the capital gains tax rate, while the acquirer is entitled to depreciate the goodwill purchased over a period of 10 years.

Goodwill is not defined in the Israeli Tax Code. However, case law indicates that goodwill comprises the advantage and/or connection of a business and is characterized by the tendency of customers to return for repeat business.

Goodwill valuation

The Israeli Supreme Court held in 2003 that the appropriate way to assess goodwill transferred as part of a sale of a business is the "Residual Method”. Under this method, the consideration is first allocated to the physical assets sold and to the intangibles whose value can be determined. The residual is considered to be the value of the goodwill sold.

In addition, an "Industrial Company” may depreciate the costs of purchasing know-how, patents and rights to make use of a patent at the rate of 12.5% per year.

Depreciation rates of various assets

The depreciation rates of various assets are as follows:


Industrial 5%

Hotels 5%

Agricultural 1.5%

Others 4%


Private and commercial 15%

Trucks 20%

Machinery and equipment:

Construction equipment 20%

Hotel equipment 20%

Industrial 20%, 30%, 40% (in one, two or three shifts, respectively)

Computers and software 33%

Dr. Avi Nov Law Offices, Israeli & international tax law 

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*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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