Value-added tax (VAT)
The current rate of VAT is 17%.
Exports of goods and certain services and various other transactions are zero-rated, and certain transactions are exempt. Banks and other financial institutions pay VAT-equivalent taxes at the rate of 17% based on their total payroll and on profits. Not-for-profit organisations pay VAT-equivalent tax (wage tax) at the rate of 7.5% of their total payroll.
Customs duty is imposed on certain products imported into Israel. The rates of duty depend upon their classification according to the Harmonised Customs Tariff and the country of origin. Israel has concluded free-trade agreements with the United States (US), Canada, Mexico, the European Union (EU), and the European Free Trade Association (EFTA).
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, and the rates vary.
Municipal tax is levied annually on buildings by local municipalities based on the size, location, and purpose of the property.
Property taxes are generally imposed on the occupier of commercial and residential real property. Unoccupied property is generally taxed on the property's owner. The tax is imposed at the municipality level.
Real estate capital gains
Capital gains on real estate are subject to the Land Appreciation Tax Law. The law relates to any real estate in Israel, including houses, buildings, and anything permanently fixed to land; real estate rights; and leases for 25 years or more. Tax calculations closely follow the calculation of corporate tax on capital gains (see Capital gains in the Income determination section).
The tax rate on the real gain is the applicable corporate tax rate (24% in 2017 and 23% in 2018).
A special tax rate may apply with respect to real estate acquired prior to 1960.
The purchaser of real estate is generally subject to acquisition tax at rates up to a maximum of 10% (the highest rate applies when the purchase price exceeds approximately ILS 16.6 million).
There are no stamp taxes imposed in Israel.
Employer’s national insurance contributions
Employers are obligated to pay national insurance contributions based on a percentage of each employee’s income on a monthly basis. Employers are responsible for withholding employees’ contributions from wages and remitting these together with the employer’s own contributions. The employer’s contribution rates (current as of January 2017) for Israeli-resident employees are 3.45%, up to monthly income of ILS 5,804, and 7.5% on the difference between ILS 5,804 and the maximum monthly income of ILS 43,240.
For non-resident employees, the employer rates are significantly lower and are 0.49%, up to monthly income of ILS 5,804, and 2.55% on the difference between ILS 5,804 and the maximum monthly income of ILS 43,240. The minimal national insurance payments for non-resident employees do not provide any retirement benefit for the non-resident but generally provides a certain element of work accident coverage.
When an irregular salary payment in excess of one quarter of the usual salary is made, special provisions apply to the computation of social charges by which the application of this payment is equally attributed to the current month and to the past 11 months.
Israel has social security totalisation agreements with 14 countries that may allow for an exemption from Israeli national insurance throughout the employment period of the employee in Israel.