National insurance contributions
Resident employees
Employees’ national insurance contribution for resident employees is 0.4% on the first ILS 7,522 of income per month and 7% on the difference between ILS 7,522 and the maximum monthly compensation amount of ILS 49,030.
Employers' national insurance contribution for resident employees is 3.55% on the first ILS 7,522 of income per month and 7.6% on the difference between ILS 7,522 and the maximum monthly compensation amount of ILS 49,030.
Non-resident employees
Employees’ national insurance contribution for non-resident employees is 0.04% on the first ILS 7,522 of income per month and 0.87% on the difference between ILS 7,522 and the maximum monthly compensation amount of ILS 49,030.
Employers' national insurance contribution for non-resident employees is 0.59% on the first ILS 7,522 of income per month and 2.65% on the difference between ILS 7,522 and the maximum monthly compensation amount of ILS 49,030.
Special rules and rates
Special detailed rules and rates regarding national insurance contributions apply to irregular salary payments, the self-employed, and to other sources of income generated by an Israeli resident (i.e. rent, interest, dividends, pension, etc.). Capital gains are not subject to national insurance contributions.
Health insurance tax is levied at 3.10% on the first ILS 7,522 and at 5% on the difference between ILS 7,522 and the maximum monthly compensation amount of ILS 49,030. Non-residents are not subject to health insurance tax.
Special detailed rules and rates regarding health insurance tax apply to irregular salary payments, the self-employed, and to other sources of income generated by an Israeli resident (i.e. rent, interest, dividends, pension, etc.). Capital gains are not subject to health insurance tax.
Land appreciation tax (LAT)
LAT is imposed on gains from the sale of Israeli real estate. LAT is also imposed on the sale of an interest in a non-traded real estate association (REA), defined as a company or partnership whose principal assets consist of Israeli real estate. However, the tax liability arising from the sale of such an association will be determined based on the capital gains tax provisions of the Israeli ITO. For LAT purposes, a sale includes most types of dispositions, as well as the grant of a lease capable of lasting for 25 years or more.
In measuring the lease period, an option to lease is considered as if exercised. Detailed expenditure deduction rules are prescribed for LAT purposes.
The resulting taxable capital gain is divided into real and inflationary elements.
The real capital gain is taxable as follows:
Assets purchased from 7 November 2001 and thereafter
The tax rate applicable to real capital gains derived from the sale of an interest in real estate (and in REAs that enjoyed this status for at least five years prior to the sale) for individuals is 20%.
Assets purchased prior to 7 November 2001
- Capital gains arising from the sale of an interest in real estate (and in REAs) shall be apportioned on a linear basis to the periods before and after 7 November 2001.
- The portion of the gain attributed to the period before 7 November 2001 shall be subject to tax for individuals at the taxpayer's marginal tax rate, up to 50% (including surtax) depending on the date of acquisition.
- The portion of the gain attributed to the period from 7 November 2001 until 31 December 2011 shall be taxed at the rate of 20% for individuals.
- The portion of the gain attributed to the period from 1 January 2012 until the date of the sale shall be taxed at the rate of 25% for individuals (or at the rate of 30% if the individual is a 10% or more shareholder).
Consumption taxes
Value-added tax (VAT)
The current rate of VAT is 17%. See the Other taxessection in the Corporate tax summary for more information.
Net wealth/worth taxes
Israel does not have a net wealth/worth tax.
Inheritance, estate, and gift taxes
Israel does not haveany estate or inheritance taxation.
Israel does not impose a special gift tax on the gifting of assets.
Property taxes
Property taxes are generally imposed on the occupier of commercial and residential property. Unoccupied property is generally taxed on the property's owner. The tax is imposed at the municipality level.
Luxury and excise taxes
Israel imposes an additional 3% on personal income at the highest marginal rate (which increases the highest tax marginal rate from 47% to 50%).
A luxury tax is also imposed on the purchase of certain yachts and luxury cars.
Israel imposes excise taxes on a variety of goods (e.g. gasoline and diesel fuel used for transportation, tobacco, alcohol). The excise taxes are levied item-by-item, andthe rates vary.
FAQs
A minimum tax rate of 31% generally applies to certain classes of passive income not derived from business or employment earned by a taxpayer under age 60.
Do US citizens pay taxes in Israel? ›
US expats in Israel need to be aware that they can be subject to taxation in two different countries. First, virtually all US citizens are required to file an annual US Federal tax return, regardless of where they live. Second, by living abroad in Israel, American expats also can be subject to taxation by Israel.
Does USA have a tax treaty with Israel? ›
The Israel US tax treaty contains a "savings clause" which allows the U.S. to impose taxes on its citizens according to its own laws, even if this contradicts the treaty. As a result of this clause, the majority of the benefits and reductions offered by the treaty do not apply to U.S. citizens living in Israel.
Why is tax so high in Israel? ›
Taxes on imported goods, VAT (value added tax), income tax, and real estate transaction taxes are imposed by the state, and municipalities collect taxes on property rentals and ownership. Israel's high defense budget and social democratic government policies are often cited as reasons behind the high rates of taxation.
How does individual tax work? ›
The individual income tax (or personal income tax) is a tax levied on the wages, salaries, dividends, interest, and other income a person earns throughout the year. The tax is generally imposed by the state in which the income is earned.
What is the individual tax? ›
An individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income.
What is the 183 day rule in Israel? ›
Therefore, when an individual will meet the 183 days test for the first two years (without necessarily meeting the centre of life test during the first two years) and the centre of life test during the next two years, the person would be regarded as a foreign tax resident for this entire period.
What is the average salary in Israel? ›
The average salary for a salaried position at current prices was 12,860 Shekels (USD 3,600) per month, an increase of 6.1 per cent compared to 2022 when it was 12,116 Shekels (USD 3,370) per month.
Is Israel a high tax country? ›
During that period, the highest tax-to-GDP ratio in Israel was 34.1% in 2000, with the lowest being 29.3% in 2009. Israel ranked 25th¹ out of 38 OECD countries in terms of the tax-to-GDP ratio in 2022. In 2022, Israel had a tax-to-GDP ratio of 32.9% compared with the OECD average of 34.0%.
Does Israel tax foreign income? ›
Income tax
Israeli residents are taxed on their worldwide income, while non-residents are taxed only on their Israeli-sourced income. Income includes employment and business income, and passive income from bank deposits and savings.
Tax benefits for new immigrants and returning residents
Exemption from Israeli taxation for a period of ten years from the date of becoming Israeli tax resident on income from a business, vocation, or salary that is accrued or derived from outside of Israel. This exemption may be limited in certain cases.
Do Israelis file taxes? ›
Subject to certain exceptions, as detailed below, an individual who is a resident of Israel is required to file an annual tax return.
Is Health Care Free in Israel? ›
Israel provides a right to healthcare and universal healthcare for its citizens. To receive healthcare as an Israeli citizen, you must sign up for a Kupat Cholim, one of Israel's public healthcare companies. Most costs are paid by the Kupat Cholim, or by co-payments at the time of service.
What is Israel's biggest source of income? ›
The most important economic sectors are technology, manufacturing, and diamond polishing and cutting. In 2022, Israel's GDP amounted to 501.4 billion U.S. dollars, and, according to estimates, it will increase to 611.8 billion U.S. dollars by 2026.
What is passive income in Israel? ›
* Passive income (rent, interest, dividends, capital gains, etc.) from an individual under 60 is not eligible for the tax rate in Israel of less than 31%. * Passive income (rent, interest, dividends, capital gains, etc.) from an individual under 60 is not eligible for the tax rate in Israel of less than 31%.
Are taxes in Israel high? ›
The OECD's annual Revenue Statistics report found that the tax-to-GDP ratio in Israel increased by 0.5 percentage points from 32.5% in 2021 to 32.9% in 2022. Between 2021 and 2022, the OECD average decreased from 34.2% to 34.0%.
What is the average individual income in Israel? ›
Israelis earn USD 39 322 per year on average, less than the OECD average of USD 49 165. Another essential factor of employment quality is job security, in terms of expected loss of earnings when someone becomes unemployed.
What is the monthly income tax in Israel? ›
1. Tax brackets on income from personal exertion
| Monthly income (monthly tax brackets) | Annual income (annual tax brackets) | Tax rate |
|---|
| Up to 7,010 NIS | Up to 84,120 NIS | 10% |
| 7,011 NIS – 10,060 NIS | 84,121 NIS – 120,720 NIS | 14% |
| 10,061 NIS – 16,150 NIS | 120,721 NIS – 193,800 NIS | 20% |
| 16,151 NIS – 22,440 NIS | 193,801 NIS – 269,280 NIS | 31% |
2 more rowsValue added tax (VAT) is imposed on any transaction executed in Israel, on import of goods by every person and on provision of services, in a single rate from the sum of the transaction or the price of the goods.
