• A dividend distribution totaling 6% of its accumulated profits (or 5% if distributed during 2025 only)
This section will not apply in the case of the following circumstances:
• The company has no surplus profits.
• The CHC’s current (business/capital) losses exceed 10% of its accumulated profits
• A dividend distribution exceeding 50% of the surplus profits was made.
Effective from 1 January 2025, ITO Section 62A has been materially expanded to introduce stricter taxation rules for any CHC that is not specifically excluded by the law. These changes are designed to address cases in which CHC profits originate from services provided by individual shareholders sourced by personal exertion, ensuring such income is taxed as personal earned income at individual rates. Key updates include reducing the evaluation period for determining service-based revenue, raising the threshold for officeholder exemptions, and introducing stricter rules for taxing excess profitability and intercompany dividends. Section 62A excludes controlled foreign corporations (CFCs), foreign investment companies (FICs), and approved/ preferred/industrial enterprises. In addition, the section also excludes CHCs with turnover exceeding ILS30 million per controlling shareholder (including through a relative) and CHCs with accumulated profits not exceeding ILS750,000 at the level of the group of companies held by a controller shareholder.
These provisions aim to prevent the misuse of CHCs as vehicles to shield individual shareholders from one level of taxation, thereby aligning corporate tax practices with individual tax obligations.
Investment income. The following tax rates apply to investment income and gains derived by individuals.
Income
Real (inflation adjusted) capital gains derived from publicly traded and untraded securities
Rate (%)
General rate for individuals on gains accruing from 1 January 2012 25
Individuals who were 10%-or-greater shareholders (material shareholders) in the company concerned at any time within the 12 preceding months 30
General rate for individuals on linear portion of gains accruing during the period of 1 January 2003 through 31 December 2011 20
Gains accruing to material shareholders during the period of 1 January 2003 through 31 December 2011 25
Gains accruing before 1 January 2003; old rates that apply to the time-based linear portion of the gains Up to 50
Capital gains from securities that are not linked to the consumer price index or
surcharge is added if income exceeds ILS721,560 in 2024. As of 1 January 2025, 2% in addition to the 3% is levied on income above the threshold of ILS721,560 (the 2% surcharge will be levied on income derived from passive/capital sources).
Gains derived from sales of bonds issued by a foreign country or foreign mutual funds are subject to tax at the rate of 25% (or 30% if a material shareholder). Nonresidents are exempt from Israeli tax on capital gains derived on the Tel-Aviv stock exchange or on Israeli securities on an overseas exchange. However, if an Israeli resident owns at least 25% of a nonresident investor company, such exemption does not apply. A 3% surcharge is added if income exceeds ILS721,560 in 2024. As of 1 January 2025, 2% in addition to the 3% is levied on income above the threshold of ILS721,560 (the 2% surcharge will be levied on income derived from passive/capital sources).
Gains attributable to real estate. Gains derived from sales of Israeli real estate or from sales of interests in real estate entities (entities whose primary assets relate to Israeli real estate) are subject to land appreciation tax at the regular rates of up to 50% for the portion of the gain that relates to the period before 7 November 2001. For the linear portion that relates to the period after that date, the applicable rate is 25% from 2007, with the exception of material shareholders who are taxed at a rate of 30%. Assets acquired in 2002 are eligible for a tax rebate of 20%. Assets acquired in 2003 are eligible for a 10% rebate. Various exemptions apply to residential homes. Also, see Real estate tax in Section B. A 3% surcharge is added if income exceeds ILS721,560 in 2024. As of 1 January 2025, 2% in addition to the 3% is levied on income above the threshold of ILS721,560 (the 2% surcharge will be levied on income derived from passive/ capital sources).
In addition, the purchaser of real estate must pay transfer fees (acquisition tax) at various rates ranging from 0% to 10%. For an interest acquired in a real estate entity, acquisition tax is imposed on the underlying real estate asset value without offsetting liabilities or borrowings.
Deductions
Deductible expenses. Business-related expenses incurred by employees are deductible only in limited circumstances. For example, expenses incurred to update existing professional knowledge are deductible. However, to claim these deductions, employees generally must file annual personal Israeli tax returns, even if they are otherwise exempt from filing.
To complement the tax deductions available to employees for education, only self-employed individuals may deduct payments made to approved education funds that are used for training or education in Israel (or for any purpose after six years). The amount of the payment that may be deducted is limited to up to 4.5% of the taxable income. The annual income limit for 2024 is ILS188,544 (ILS293,397 for self-employed individuals). This limit is adjusted annually.
Israeli residents (b)
income
Nonresidents
(a) Fifty-two percent of social security contributions paid during a tax year on unemployment income is deductible for income tax purposes during the year of payment.
(b) Lower contributions may apply to Israeli residents who work abroad as selfemployed persons for continuous periods exceeding six months or for nonresident employers, unless they were hired in Israel.
Totalization agreements. Israel has entered into social security totalization agreements with the following jurisdictions.
Austria France Russian
Belgium Germany Federation
Bulgaria
Italy Slovak Republic
Canada Netherlands Sweden
Czech Republic Norway Switzerland
Denmark Poland United Kingdom
Finland Romania Uruguay
D. Tax filing and payment procedures
In principle, Israeli and foreign employers with personnel in Israel must maintain an Israeli payroll withholding tax file. Income tax and national insurance contributions relating to monthly employment income and benefits must generally be reported and remitted by the 15th day of each following month. Various other monthly or bimonthly filings may also be required from the employer, including company tax advances determined by the tax authorities and supplementary company tax advances of 45% for nondeductible expenses incurred, including car maintenance and depreciation, travel and entertainment.
Capital transactions. Capital gains transactions generally are reportable within 30 days after the transaction date. Land appreciation tax transactions are generally reportable within 30 days. Tax must be settled or paid on account within 60 days.
Annual tax returns. A general obligation to file an annual tax return exists. Nevertheless, as a result of the withholding tax system, individuals may be exempt from filing annual personal tax returns in Israel. If income was not fully and correctly withheld at source, a return should be filed to reflect full salary, income and benefits in kind.
Resident individuals over 18 years of age at the beginning of the tax year are required to file a personal income tax return. However, an exemption from filing may apply if all of the following conditions are satisfied:
• The salary does not exceed the annual ceiling of ILS698,280 per individual.
• Interest in Israel does not exceed the annual ceiling of ILS717,000.
• The amount of each type of other income (rent and foreign income) earned by the individual is less than ILS375,000 for each type of income.
Notwithstanding the above, the following individuals must file annual income tax returns:
• 10% or greater shareholders
• Spouses who work together
• Individuals (or their spouses) who receive severance pay or a commuted pension allowed to be spread over several tax years
• Trust settlors for the year in which they settle the trust
• Recipients of a distribution or other transfer of assets from a trust
• Professional athletes and their spouses
• Individuals (or their spouses or children) who had either a lawful right in a non-publicly traded foreign company or other foreign assets worth more than ILS2,086,000 at any time during the tax year or a foreign bank account with a balance exceeding ILS2,086,000 at any time during the tax year
• Individuals required to file returns for the previous year, unless a specific exemption is granted
• Any other person or entity instructed to file a return by a tax assessor
Individuals must also pay half-year advances for capital gains, which must also be reported, if the full amount of the tax was not withheld at source. The payments and reports are due on 31 January and 31 July.
Online filing. Online filing is required for those who have to file a tax return. Failure to file an online tax return by the due date results in a penalty of ILS560 for each full month of delay.
Israeli individuals who do not meet the numerical presumptions mentioned above and would like to claim severance of Israeli residency are required to file a return and fill out a residency declaration as an appendix to the return.
Due dates for tax returns. For those who do not have to file an online tax return, the due date is 30 April following the year-end. Taxpayers who are required to file an online tax return must file
Central African Lesotho San Marino
Republic Liechtenstein
Serbia
Chile Lithuania Singapore
Colombia Luxembourg Slovak Republic
Cook Islands Macau Slovenia
Costa Rica Malawi Solomon Islands
Croatia Malta South Africa
Cyprus Marshall Islands Spain
Czech Mauritius Suriname
Republic Mexico Sweden
Denmark Micronesia Switzerland
Dominica Moldova* Taiwan
Dominican Monaco Tonga
Republic Mongolia Trinidad and Ecuador Montenegro Tobago
El Salvador Nauru Tuvalu
Estonia Netherlands Ukraine
Eswatini New Zealand
United Arab
Fiji Niue Emirates
Finland North Macedonia
United Kingdom
France Norway United States
Georgia Palau Uruguay
Germany Panama Vanuatu
* The exemption applies only to citizens of Moldova who hold biometric passports.
In general, all visitor visas, with the exception of B1 and B3 type visas, are valid between 30 and 90 days and may be renewed up to 180 days.
The application takes place at an Israeli consulate or at the local Ministry of Interior.
Each jurisdiction has a unique filing procedure for obtaining a visitor visa.
Both B1 and B4 class visas may be applied for by the employer. A B1 visa may be renewed annually for up to 63 months. A B1 visa may be extended beyond 63 months under very limited circumstances.
Indian and Chinese nationals, under certain circumstances, may be eligible for a B2 visitor visa for business purposes for five years or one year, respectively, if each visit will not exceed 90 days in Israel.
G. Work permits
A foreign national may work in Israel only if he or she enters the country with a permanent residence visa or a temporary residence visa or holds a B1 or B4 visa.
An applicant and his or her employer can apply for a work permit valid for 1 year or 90 days. An applicant and his or her employer must file certain documents to obtain a work permit and a B1 work visa. The B1 work visa is always issued for a maximum period of one year and may be renewed annually, assuming that the employer and employee comply with the terms of the work permit.
The following are examples of the documents that must be filed (other forms or submissions may be required):
• Employee’s certificate of valid medical insurance
• Salary letter with verification of the expert’s salary threshold (twice the average monthly salary in the Israeli market, ILS24,758; amount is subject to annual changes)
• Evidence of expertise held by the employee, such as academic degree, diploma and training
• An employer’s undertaking that assures the employee’s departure on termination of the employment contract
• The employee’s accurate personal data, including passport number, curriculum vitae (CV), diploma, certified police clearance and medical checks
• Invitation letter from an Israeli employer or other Israeli party, explaining the reasons why the employee’s presence is needed
• Affidavit on a specified form concerning the above items
The following can apply for a B1 visa:
• An Israeli-based employer
• A foreign employer that has business ties or has entered into a service agreement with an Israeli-based entity
Detailed rules apply to employers and employees regarding, among other matters, pre-arrival medical examinations, as well as housing and medical care. As of January 2024, the amount of government registration fees for a work permit and B1 work visa application (per principal applicant for one year) is ILS12,410 (subject to periodic changes).
For the B1 work visa for non-academic experts, the regulations distinguish between experts whose work activities require academic certification and experts whose work activities do not require academic certification. Requirements for experts whose work activities do not require academic certification, include, among others, payment of the expert’s salary to a bank account in Israel and providing proof of salary payments.
B1 visas for 90 days can be utilized continuously or intermittently in the same calendar year, provided that the total number of days in a calendar year does not exceed 90 days. Each visit to Israel will require a new work permit and visa application and a consular process for the applicant to follow in the overseas Israeli consulate. Multiple applications submitted under this visa type, to utilize remaining days, is at the sole discretion of the Israeli immigration authorities. The salary requirement for the B1 visa for 90 days is currently ILS5,882 (subject to annual adjustment), which represents the minimum wage in Israel.
In addition, an alternative option exists for employees who arrive in Israel for a work purpose for a time period not exceeding 90 days. Under this option, the foreign expert can stay and work in Israel for up to 90 days in a calendar year, continuously or intermittently. The counting of the days starts with the first day of arrival in Israel. The procedure is only available for citizens from visa-exempt jurisdictions (see Section F). It applies only to foreign experts who are needed in Israel to perform a temporary expertise assignment, such as advising, supervising, repairing equipment, or making presentations.