(a) This is the regular company tax rate for profits and real capital gains for 2009. The rate is scheduled to decrease to 25% for 2010 and future years. Company tax rates ranging from 0% to 25% are available for privileged enterprises and approved enterprises or properties, and in other cases.
(b) The withholding tax is subject to applicable tax treaties.
(c) The withholding tax applies to nonresident companies and to individuals.
(d) This is a final tax. For details regarding these rates, see Section B.
(e) In principle, the withholding taxes on interest and royalties are not final taxes, but nonresidents without an Israeli presence generally do not take any further action.
(f) Alternatively, nonresident lenders may apply to pay regular company tax on their lending profit margin after deducting proven lending expenses.
(g) At the discretion of the tax authorities, interest paid to recognised foreign financial institutions that lend funds to projects benefiting Israel's economy may be subject to a reduced rate of 15% of the amount by which the loan interest exceeds the London interbank offer rate (LIBOR).
(h) A 15% tax is imposed on the approved enterprise profits and approved property profits of a branch after deducting company tax. In principle, this tax is payable together with the company tax, but the tax commissioner may allow payment of this tax on approved enterprise profits and approved property profits to be deferred until the relevant branch profits are withdrawn from Israeli business operations. This tax may be overridden by a tax treaty.
In September 2008 dramatic legislation was announced concerning new immigrants. They will enjoy a 10-year exemption from Israeli taxes on foreign assets and on any income generated abroad, including foreign salaries and foreign passive income including ...
[more]
In September 2008 dramatic legislation was announced concerning new immigrants. They will enjoy a 10-year exemption from Israeli taxes on foreign assets and on any income generated abroad, including foreign salaries and foreign passive income including interest, dividends, royalties and rental income. The provision applies to all new immigrants and returning residents who arrived in Israel as of January 1, 2007.
The 10 year exemption is also granted for capital gains on the sale of assets located outside Israel whether the asset was acquired before the immigration or returning to Israel or after it. Even if the asset will be sold after the 10 year exemption period, the gain would not be taxed retroactively but only from the end of the 10 year period in a proportional manner.
Foreign corporations controlled by new immigrants or returning residents will not be considered Israeli residents for tax purposes merely as a result of their being managed and controlled by the new immigrant or returning resident. Due to this, new immigrants and returning residents can earn income tax-free for ten years from any foreign company they control as long as the income is not generated in Israel. These reforms are designed to encourage wealthy Israelis living abroad to relocate to Israel.
From July 1 the standard V.AT rate rose from 15.5% to 16.5%. For the first time in Israel, the 16.5% V.A.T rate is also imposed on sale of fruit and vegetables. On January 1 2010, the corporate tax rate will be reduced from 26% to 25%.
[hide]