In 2011, the Knesset approved some amendments to the Israeli tax law, and among them, was the increase of the corporate tax rate from 24% to 25% and finally to 26% in 2013. Additionally, a novel income bracket of 48% in place of 45% was introduced for earnings more than NIS 489,480 per annum. People earning above NIS 1 million annually, pay a surtax of 2% on their income.
Types of Taxes
Taxes in the country include income tax, capital gains tax, value-added tax, and land appreciation tax.
Individual Tax
By its taxation law, residents in Israel have to pay taxes on all global income, while non-residents pay tax for only income earned in the country. Income liable to be charged includes; employment, business, and passive income from bank deposits and savings. A person is said to be a resident if he or she spends 183 days or more within the territory during the present tax year. Or if such a person spends 30 days or more in a current tax year resulting in a total of 425 days or more (within the preceding two years).
The rates of income tax according to the Israeli Tax Authority are as follows:
| Annual income level | tax rate |
| 0 to 75,720 | 10% |
| 75,721 to 108,600 | 14% |
| 108,601 to 174,360 | 20% |
| 174,361 to 242,400 | 31% |
| 242,401 to 504,360 | 35% |
| 504,361 to 649,560 | 47% |
| over 649,560 | 50% |
Corporate Tax
The corporate tax rate for businesses is 23%. An establishment can be subjected to paying tax if its activities are carried out and controlled within the country. While a local business is charged on its global income, a foreign company with a subsidiary in the nation can only pay taxes on income obtained from or received here. A non-resident firm with no affiliate is paid on income sourced locally. A business owner has to file an annual tax return at least five months after a financial year.
Value Added Tax
VAT is charged on goods and services, including imported ones. The rate was lowered to 17%, from 18%. Some items such as exported goods have zero tax rates. The value of imported goods, for VAT reasons, includes customs duty, purchase tax, and other levies. Offshore companies providing services through the Internet, such as Google and Facebook have to pay this tax too. It is filed electronically.
National Insurance
The rates of national insurance for employees, including health insurance. Self-employed persons have to pay from 9.82 percent to 16.23 percent.
| up to 6,331 monthly salary | 6,331 to 44,020 monthly salary | |
| Employee’s share | 3.50% | 12.00% |
| Employer’s share | 3.55% | 7.60% |
Stamp Duty
The country does not have stamp duty taxes anymore.
Adjustment Year
New migrants and returning inhabitants can apply for an adjustment year. This means that during the financial year, they would not be recognized, as Israeli citizens and thus do not have to pay the tax. However, when the year ends, if they choose to remain here, they would enjoy all the perquisites that come with the new tax reform of the nation.
Note: A returning citizen is a person who has either lived abroad for a minimum of ten years or stayed for five years and then returned to Israel from 2007 to 2009.
Special Cases of Tax Exemption
- 10-year tax exemptions for corporations run by returning citizens or novel immigrants
- 10-year exemption from reporting returns with foreign sources
- Expansion of tax benefits for returning natives and new migrants
- Pension aid for citizens coming back to Israel and immigrants
- New immigrants would receive tax deductions
- New immigrants are exempted to pay taxes for interest from foreign currency deposits for 20 years
