The State of Israel – A Tax Benefit Paradise for Foreign Residents, New Immigrants & Returning Israelis

Pick & Weiss Legal Offices
April 22, 2013
January 10, 2019

ver recent years, the State of Israel has become a true paradise in all related to withdrawing foreign capital and foreign residents and new immigrants’ investments. Inter-alia, this is because of a sophisticated taxation system that grants far-reaching tax benefits and relief as well as an impressive list of exemptions for foreign residents, new immigrants and returning Israelis. ‬

‪The aforementioned along with a stable economy, a gradual reduction in taxation rates and extensive tax agreements (more than 40 agreements), places Israel as a leader in all relating to investments in technology high tech companies and real estate assets as well as providing an ultimate framework for international taxation planning for companies and individuals.‬

‪Most important of all, Israel is a secure haven for Diaspora Jews.‬

‪The following schedule provides a summary of tax benefits, relief and exemptions pursuant to Israeli legislation, which can be used legitimately: ‬

  • ‪A tax exemption in Israel on all types of income, earnings and assets (outside of Israel) for 10 years for new immigrants & returning Israelis. This exemption is accompanied by an exemption on reporting the aforementioned earnings, income and assets. ‬
  • ‪There is no estate tax in Israel, and no gift tax apart from a gift to a “foreign citizen” of a taxable assets and capital gains in Israel. ‬
  • ‪An exemption from capital gains tax for Foreign Residents on the sale of securities registered and traded on the TASE by foreign residents ‬
  • ‪An exemption from Capital Gains tax for Foreign Residents on the sale of shares in an Israeli company (or foreign company, provided that most of its assets are in Israel), subject to a number of terms and conditions. ‬
  • ‪An exemption from Income tax on interest on bank’s deposits by foreign residents and/or new immigrants. ‬
  • ‪An exemption from tax for foreign residents on income from interest and linkage differentials on bonds traded on the TASE (subject to certain terms and conditions). ‬
  • ‪An exemption from tax on residential rent up to approx. €900 per month per individual. Alternatively, a reduced tax rate of only 10% on residential rents (without the deduction of expenses, credits or exemptions). ‬
  • ‪An exemption from betterment tax in Israel on the sale of an absolved residential apartment (under certain terms and conditions), once every four years (or 18 months when this is the only apartment). ‬

‪Furthermore, there are prescribed tax exemptions on land swapping, vacating and construction transactions, on certain transfers as a gift to a relative, on legacies, on transfers from a trustee to a beneficiary, on transfers to a land association, on transfers from a land association under dissolution. ‬

‪New immigrants are entitled to an exemption from purchases tax up to a sum of approx. NIS 1.4 million (approx. €280,000), as at February 2010 and on the balance they should pay 5%. ‬

  • ‪Section 6 of the agreement between Israel and France (from 1963) prescribes that the tax on income from property assets (real estate) in Israel to be paid by a French citizen will only be paid in Israel (the place and which the land is located). The opposite holds true for an Israeli citizen who invests in real estate in France. ‬

‪Section 13 of the agreement adds that earnings produced from transferring land will be taxed in the engaging country in which the aforementioned land is located.‬

  • ‪The Encouragement of Apartment Leasing Law – A reduced tax rates on earnings and dividends (a total tax of only approx. 24% in 2010).‬
  • ‪A low company tax rate (compared with other countries).‬

‪In 2010, a fixed rate of 25% – to be reduced by 1% per year until 20% in 2015. Moreover, there is a law proposal (as yet to be approved) to reduce the rate to 18% from 2016 onwards). ‬

  • ‪Foreign citizen trusteeship – Under certain conditions, no tax liability shall apply to trusteeships and Israeli citizen beneficiaries.‬
  • ‪An investment in a REIT fund – An alternative to a direct investment in real estate, enables distributing the investment over a number of assets, even when the investments is not high. A further advantage – negotiability, compared with a direct investment in real estate.‬
  • ‪An exemption from capital gains tax in Israel for foreign investors in hedge funds. ‬

‪The aforementioned contains nothing to serve as an opinion and/or an alternative to individual legal taxation advice. We will be happy to be at your disposal for any queries and or explanations regarding this or any general matter. Our office specializes in taxation advice (income tax, betterment tax, VAT) and also accompanies real estate, company and international transactions. ‬


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