Taxes in Israel

Tax rates in Israel in 2026: the short version

Israel combines high rates with generous reliefs: the top income tax rate with the surtax reaches 50%, while a new immigrant pays no tax on foreign income for 10 years. So the final burden depends less on how much you earn than on where the income is earned and when you became a resident.

Israeli taxes are calculated in shekels, and the tax year is the calendar year. You can compare Israel with other countries in our taxes by country overview, and the terms of moving are on the immigration to Israel page.

Compare taxes in 146 countries: relocation taxes 2026

Who pays tax and on what income

Israeli tax residents are taxed on the income they earn anywhere in the world. Non-resident individuals pay personal income tax on Israeli-source income and capital gains tax on assets located in Israel, subject to special exemptions for non-residents. Source rules determine when income is treated as coming from an Israeli source.

Israel tax residency: how to become a resident and count the days

Israel looks at your centre of life: home, family, work. Days only create a presumption: 183 days in a tax year, or 30 days in the year and 425 over three years in a row. The presumption can be rebutted if your centre of life is elsewhere.

A resident pays progressive income tax on worldwide income, and new immigrants get relief on foreign income. A non-resident pays only on Israeli income. The status is confirmed by an Israel Tax Authority certificate.

Mistakes cost more: three years of short visits add up to 425 days faster than it seems. Murblz support removes these risks: we count three years of days, assess your centre of life and obtain the certificate. We guarantee professional work and a transparent process, and in most cases a result on the first filing.

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What changed in 2026

• A lighter scale for middle incomes. The 20% bracket now runs to 228,000 shekels a year and the 31% bracket to 301,200 shekels.
• Tax-free Israeli salary for new residents. Anyone who became resident between 5 November 2025 and 31 December 2026 pays no tax on earnings in Israel up to an annual cap until 2030.
• The reporting exemption is gone. New immigrants who became resident from 1 January 2026 still pay no tax on foreign income, but must show it in their tax return.
• Surtax on investment income. Since 2025 an extra 2% applies on top of the general 3% surtax to interest, dividends, rent and capital gains above 721,560 shekels a year.
• VAT. The rate has been 18% since 1 January 2025.

Personal income tax rates in 2026

The personal scale is progressive: each rate applies only to its own slice of income. At the end of March 2026 a new law widened the 20% and 31% brackets, with effect for income from 1 January 2026. The other thresholds are frozen until 2027 and are not indexed.

Tax is reduced by credit points. In 2026 each point is worth 242 shekels a month, or 2,904 shekels a year (about $949). Residents get them, the number depends on gender, children, age and status, and new immigrants receive extra points in their first years.

Non-residents pay on the same scale, but only on Israeli income.

How much tax is taken from a salary in Israel: a worked example

Two deductions come off an Israeli salary: income tax on the scale minus tax credit points, and national insurance together with health tax. Every resident gets credit points, each worth 242 shekels a month in 2026: a man gets 2.25 points, a woman 2.75, with more for children and new immigrants.

Worked example: a resident man without children and without other reliefs. The monthly bands in 2026 are 10% up to 7,010 shekels, 14% up to 10,060, 20% up to 19,000, 31% up to 25,100, 35% up to 46,690, 47% up to 60,130 and 50% above. National insurance is charged on pay up to 51,910 shekels a month.

One more mandatory deduction is pension: by law the employee pays 6% of salary into a pension fund, and the employer adds 6.5% plus 6% for severance. This money stays yours, and part of the contributions earns a tax credit.

Investment income

If rent is above 5,654 shekels a month, the exemption shrinks and disappears completely at 11,308 shekels (about $3,693). For the owner of one rented flat the exemption or the 10% rate is usually better, while the regular track makes sense when upkeep and repair costs are high.

Property: buying, owning, selling

Purchase tax on homes in 2026 depends on whether it is the buyer's only home.

The investor rates apply under a temporary order until 31 December 2026. The price of a new build from a developer already includes 18% VAT.

• Owning. The annual municipal tax is paid by whoever lives in or rents the flat. Each city sets its own rate per square metre.
• Selling. Tax is 25% of the real gain. The sale of a single home held for at least 18 months is exempt if the price does not exceed 5,008,000 shekels (about $1,635,373); this ceiling is frozen until 2027.
• Land value uplift. If the city changes the zoning plan and the plot gains value, the seller pays a levy of 50% of that uplift.

Benefits for new immigrants and returning residents

A new immigrant, or a returning resident who lived abroad for at least ten years, pays no Israeli tax on foreign income for ten years from the date of the status: salary and business abroad, interest, dividends, rent and gains on foreign assets. Those who became resident from 1 January 2026 must show this income in the annual return, even though no tax is due on it.

People who became resident between 5 November 2025 and 31 December 2026 get a further benefit: earnings in Israel, meaning salary and income from their own business, are tax-free up to an annual cap.

The 2026 cap is reduced in proportion to the months lived before residency began. Payments from related parties, other than one's own company, are exempt only up to 140,000 shekels a year (about $45,718). Israeli interest, dividends, rent and capital gains are not covered.

Companies and business

• Corporate income tax for an Israeli company is 23%.
• Dividends to the owner carry a further 25%, or 30% for a holder of 10% or more. Together with corporate tax the total burden on distributed profit reaches about 46% for a major shareholder.
• VAT is 18% on most goods and services; export of services to foreign clients is usually zero-rated.
• The self-employed pay income tax on the scale with advance payments during the year, plus National Insurance and health insurance contributions.

VAT in Israel: rates and who pays

The standard VAT rate in Israel has been 18% since 1 January 2025. A zero rate applies to exports of goods and most services to foreign clients, and in the resort city of Eilat local sales are VAT-exempt.

A business with turnover up to 122,833 shekels in 2026 can operate as VAT-exempt: it does not charge VAT to clients, but cannot reclaim VAT on its costs either. Above the threshold VAT registration is mandatory, and for some professions, such as doctors, lawyers and accountants, it is mandatory from the first shekel. VAT returns are filed monthly or every two months depending on turnover.

The self-employed and freelancers in Israel

A self-employed person in Israel pays income tax on the same scale as an employee, but higher national insurance: 7.7% on income up to 7,703 shekels a month and 18% above, up to a ceiling of 51,910 shekels. Part of the contributions reduces taxable income.

Since 2017 every self-employed person aged 21 and over must pay into a pension fund. Tax is paid in advances during the year, at a rate the tax authority sets from the previous return. For opening a company see company registration in Israel, and for its account see business account in Israel.

Tax returns and residency certificates

The Israeli tax year is the calendar year. Employers withhold tax from salaries every month, and an employee with no other income usually does not file a return. The self-employed, people with substantial investment income or foreign assets, and from 2026 new residents with foreign income must file. For banks and tax authorities abroad the tax authority issues a certificate of residency, which is used to apply double tax treaties.

Double tax treaties

Israel has several dozen double tax treaties, including with European Union countries, the United States, the United Kingdom and former Soviet states. The 1994 treaty with Russia is in force: Russia did not include Israel in the list of countries with which it suspended treaties in 2023.

A treaty decides which country taxes pensions, dividends and interest, and lowers withholding tax. Israel credits tax paid abroad, but not above its own tax on the same income. For a foreign bank or company to apply a reduced rate you need an Israeli tax residence certificate, and for Israel to credit foreign tax you need proof of payment.

For a new immigrant treaties matter less while the 10-year relief on foreign income applies. They become central once the relief ends, and for Israeli income that another country also claims.

Leaving Israel

A person who stops being tax resident is treated as having sold their assets the day before leaving. The tax on the gain can be paid at once or deferred until the actual sale; in the second case the taxable part of the gain is proportional to the time the asset was held while resident in Israel. It is best to arrange the end of residency in advance: notify the tax authority and prepare evidence that the centre of life has moved to another country.

Common mistakes

• Counting only days. The 183-day threshold is just a presumption; the centre of life decides: home, family, work, accounts.
• Not closing the previous residency. Two countries may then treat the person as resident at the same time.
• Not reporting foreign income after 2026. No tax is due on it, but omitting it from the return can lead to penalties.
• Buying a second home as if it were the first. The reduced purchase tax applies only to a single home; otherwise the rate is 8%.
• Forgetting the 2% surtax. Selling a large shareholding or a flat can push the year's income above 721,560 shekels, adding another 5% to the gain.

What it means if you relocate

Israel is tax-efficient in the first years after a move and for people whose capital and income stay abroad: 10 years without tax on foreign income outweigh the high rates. An Israeli salary is fully taxed unless you fall under the 2026 relief for new residents.

• Who it suits. New immigrants with a business, investments and rental income abroad, remote employees of foreign companies, and returning residents who have lived abroad for 10 years or more.
• Who it does not suit. Those planning a high Israeli salary after the reliefs end: the 47-50% rate starts at 46,690 shekels a month. Investors in Israeli property: buying a home that is not your only one costs 8-10% of the price in tax.
• Where to start. The right to immigrate, the date you take up status, and a plan for foreign accounts and assets before arrival. More on the move is on the immigration to Israel page, and an overview of the country on Israel.

For a living budget see cost of living in Israel, for buying a home see buying an apartment in Israel, and for how days are counted in different countries see tax residency and the 183-day rule.

How we help

We calculate taxes in Israel and in your current country on the same figures, pick the residency date so you do not lose the 2026 benefits, and prepare documents for the tax authority. For investors we cover buying and selling flats, rental income and the ownership structure of a company.

What matters to know about taxes in Israel

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