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Israel Corporate - Tax administration

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Taxable period

The tax year is generally the calendar year. Certain entities may apply to have their tax year-end on different dates, specifically mutual funds, government companies, quoted companies, and subsidiaries of foreign publicly listed companies.

Tax returns

The Israeli system is based on a combined form of assessment and self-assessment.

The statutory filing date is five months following the end of the tax year, which for a calendar year taxpayer would be 31 May. It is possible, however, to secure extensions of the filing date.

Payment of tax

Generally, 12 monthly advance payments are levied at a fixed ratio of the company’s turnover. Alternatively, a company may be required to make ten monthly payments beginning in the second month of its tax year, each payment being a fixed percentage of the previous year’s tax assessment.


Penalties are imposed on overdue advance payments and on delays in the submission of tax returns. For any tax due for a certain year that has not been paid by the end of that tax year, the taxpayer shall be charged interest at a rate of 4% and linkage differentials for the period from the end of the tax year until the date of payment. If the balance due is paid by the end of the first month following the end of the tax year, the taxpayer should receive a full exemption from any interest and linkage differentials.

When the ITA determines that a taxpayer has a tax deficiency exceeding 50% of the total tax due and the taxpayer has not proven to the satisfaction of the ITA that it was not negligent in its tax reports filed (or where there was a failure to file reports), a penalty equal to 15% of the tax deficiency shall be imposed.

A penalty equal to 30% of the tax deficiency may be imposed when an additional tax liability exceeding ILS 500,000 is issued by the ITA further to a tax assessment and the tax deficiency is more than 50% of the total tax due (additional conditions apply).

Tax audit process

A tax return, once filed, constitutes a self-assessment that remains open to review by the ITA generally for four years from the end of the tax year in which the tax return is filed. If no return is filed and a tax officer believes a taxpayer owes tax, the tax officer may issue a ‘best judgement’ assessment without time limit.

An assessment issued by an Assessing Officer may be challenged by the taxpayer in writing within 30 days stating in the objection the reasons why the assessment is not correct. A different Assessing Officer will then review the facts of the case. If following the filing of the objection the taxpayer reaches an agreement with the Assessing Officer, the tax assessment shall be amended and a notice of tax served on the taxpayer. If no agreement is reached, the Assessing Officer may determine the tax by issuing a Written Order, which may confirm, increase, or reduce the original tax assessment. If following the conclusion of the statute of limitation period or within one year after the appeal was submitted, whichever is later, no agreement is reached and no Written Order was issued, then the taxpayer's objection shall be deemed to have been accepted.

An appeal of a Written Order may be made by the taxpayer directly to the Israeli district courts. There is no special tax court system in Israel. A decision of the district court may be appealed to the Supreme Court as a court of civil appeals.

Detailed rules apply to the procedural appeal process.

Topics of focus for tax authorities

Some key tax issues that the ITA has focused on recently include:

  • Transfer pricing.
  • Treaty shopping to reduce WHT and capital gains tax.
  • WHT on payments to overseas service providers and for payments in regard to software.

Last Reviewed - 01 December 2017

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