Israel accounting & tax considerations

Since 2003, Healy Consultants group PLC assists our Clients to timely comply with their annual legal, accounting and tax obligations in Israel.

• Tax rates

  • In 2021, most Israeli resident companies pay a corporate tax of 23%.
  • However, to stimulate investment in the country, Israel has a tax benefits program for certain eligible companies. For example:
    • A company is designated by the Israel Tax Authority as a Priority Enterprise if its export make up at least 25% of total annual sales turnover. A Priority Enterprise i) pays a mere 7.5% corporate tax if established in a so-called National Priority Area in Israel ii) pays 16% corporate tax if established in Central Israel and iii) pays a reduced dividend rate of 15%.
    • A company is designated by the Israel Tax Authority as a Special Priority Enterprise if i) its total annual revenue within Israel is at least US$250 million ii) its consolidated balance sheet is at least US$2.5 billion and iii) it invests up to US$200 million and US$37.5 million in equipment and R&D respectively in Israel over three years and iv) it employs at least 250 staff. A Special Priority Enterprise pays a) just 5% corporate tax if established in a National Priority Area and b) 8% corporate tax if established in central Israel.
    • A company is designated by the Israel Tax Authority as a Preferred Technological Enterprise if i) average research and development (R&D) expenses in the three years before the current tax year are at least 7% of total revenues and either ii) more than 20% of the staff work in R&D or iii) for three years before the current tax year corporate income grew 25% year-on-year or iv) the company’s headcount increased 25% year-on-year for three years. A Preferred Technological Enterprise i) pays 7.5% corporate tax if established in a so-called National Priority Area in Israel ii) pays 12% corporate tax if established in Central Israel.
  • Israel’s personal income tax rate is determined by an individual’s personal income level. Income tax brackets increase gradually and span from 10% for monthly income up to NIS 5,270 (US$1,318) to 50% for income exceeding NIS 66,960 (approximately US$16,740).
  • Employees are entitled to a mandatory pension and severance funding after working for a minimum three to six months at a company. The stipulated minimum pension fund contribution is 18.5% of gross salary. The employer pays 6.5% towards pension funding and 6% towards severance. The employee pays 6% towards pension funding.
  • There is no tax on estate or inheritance in Israel. However, capital gains tax of between 25% and 40% is payable on gifts to foreign residents and the sale of assets acquired by a way of gift.
  • Dividends payable to an Israeli company from another Israeli company, resulting from income produced or accrued in Israel are exempt from tax.
  • Dividends payable to Israeli companies from income produced or accrued, or dividends received, from abroad are subject to 23% withholding tax (if received by an Israeli company) or 25% (if received by an individual). However, dividends paid from Priority Enterprises and Special Priority Enterprises are subject to 20% withholding tax, which may be reduced by a double tax treaty, depending on the country.
  • Dividends paid to shareholders who hold less than 10% of a company are subject to a 25% withholding tax. Dividends paid to shareholders with more than 10% stake in a company are subject to 30% withholding tax.

• Value Added Tax

  • Current Israel VAT in 2021 is 17%. There are exemptions for companies whose annual revenues are less than NIS 99,893 (US$30,793).
  • Israel banks and financial services providers pay 17% VAT-equivalent on total
  • Zero-rate VAT is applied to products which are i) exported from Israel and ii) intangible.
  • Zero VAT is applied to i) tourism services ii) cargo transportation iii) products and services sold to the Eilat Free Trade Zone.
  • VAT returns are submitted to the Israel Tax Authority.

• Filing due dates

  • The Israeli tax year is normally the calendar year. Companies must submit a tax return (both assessed and self-assessed) by 31 May. An extension may be granted by the Israel Tax Authority.
  • VAT returns must be submitted by the 15^th of the month following the reporting period end. Any VAT due should be remitted according to the same timetable and may only be paid to approved Israeli banks.

• Late/non filing of tax returns

  • Non-declaration of VAT payment results in i) NIS 217 (US$67) fine for every two days beyond the filing deadline, ii) 4% interest on late payments and iii) potential criminal charges for serious offences like non-disclosure.

• Our fees for accounting & tax support in Israel

  • For an active trading company, Healy Consultants Group’s fees to discharge our Client’s annual company accounting, auditing and tax obligations efficiently and effectively is US$2,300. Following receipt of a set of draft accounting numbers from our Client’s company, we will more accurately advise accounting and tax fees. For a dormant company, Healy Consultants’ fee is only US$1,165.

• Monthly book-keeping service

  • Healy Consultants Group will be happy to provide a monthly book-keeping service for your Israeli company. Typically, our Accounting and Tax department (ATD) team will receive a Dropbox of data from our Client and will immediately thereafter support our client with a i) general ledger, ii) trial balance, iii) monthly and quarterly management accounts and iv) monthly and quarterly government reporting, including tax and payroll.
  • For further details on our book-keeping service, visit this page.

Conclusion

It is important that our clients are aware of their personal and corporate tax obligations in their country of residence and domicile, and that they fulfil these obligations annually and in a timely and efficient manner. Let us know if you need Healy Consultants Group’s help to clarify your obligations.