| Taxable income bracket (IS) |
Tax Rate % |
| 1 - 62,640 |
10% |
| 62,641 - 107,040 |
14% |
| 107,041 - 166,320 |
21% |
| 166,321 - 237,600 |
31% |
| 237,601 - 496,920 |
34% |
| 496,921 - 803,520 |
48% |
| 803,521 and Over |
50% |
| Taxable income bracket (IS) |
Tax Rate % |
| 1 - 237,600 |
31% |
| 237,601 - 496,920 |
34% |
| 496,921 - 803,520 |
48% |
| 803,521 and Over |
50% |
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 2016Israel's corporate income tax rate is 25%.
Individual income tax rates in 2016 are 10%-50%.
There are reduced tax rates for passive income, e.g. flat rental and interest.
Personal Income Tax (for both the employed and self-employed) is a progressive tax starting at 10% and increasing to a maximum of 50% (at present, on a gross monthly income of about USD 17,000).
Allowance points are granted on the tax due which reduces the tax payable (an allowance point is worth approximately $650 a year).
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.
Corporate tax, including income tax and corporate tax is fixed at the rate of 25% in 2016.
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.
Social security payments are subject to a monthly ceiling of
I.S. 43,240 (2016)
The top rates are:
Employer - 7.5%
Employee -12.0%
Self employed pay 9.82% for monthly income of up to IS
5,678, 16.23% on the excess up to IS 43,240.
Israel Tax Withholding
The tax withholding rates for payments to non-residents are:
Dividend - 25%/30%
Royalties - 25%
Interest - 15%/20%/25%
Lowest Individual Tax Rate is 10% and Highest Rate is 50%
| Taxable income bracket (IS) |
Tax Rate % |
| 1 - 63,360 |
10% |
| 63,361 - 108,120 |
14% |
| 108,121 - 168,000 |
21% |
| 168,001 - 240,000 |
31% |
| 240,001 - 501,960 |
34% |
| 501,961 - 811,560 |
48% |
| 811,560 and Over |
50% |
Note :The annual tax rates for passive income, e.g. business
rental, are:
Tax % Income (IS)
31% 1-240,000
34% 240,001-501,960
48% 501,961 -811,560
50% 811,561 and over
Corporate tax, including income tax and corporate tax is fixed at the rate of 26.5% in 2014.
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.
The rate of tax payable on capital gains interest and dividend from shareholding is 20% for non-qualifying shareholding of up to 25% in a unlisted company.
For the purpose of calculating a capital gain, the gain is decreased in line with the rate of increase in inflation, from the date of purchase to the date of sale. In regard to capital gains in a corporation, identical relief is allowed at the rate of increase in the Index.
Companies pay 27.5% tax on capital gains. In sale of participation, 95% is tax exempt, subject to certain conditions.
Tax Deductions at Source in Israel
Social security payments are subject to a monthly
ceiling of I.S. 43,240 (2014)
The top rates are:
Employer - 6.75%
Employee -12.0%
Self employed pay 9.82% for monthly income of up to IS
5,297, 16.23% on the excess up to IS 42,435.
The tax withholding rates for payments to non-residents
are:
Dividend - 20% /25%
Royalties - 25%
Interest - 15%/20%/25%
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 January 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.
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%
Note The above rates are the basic rates. There are
additional benefits for equipment operated on (2 and 3)
shifts in industrial companies or hotels.