Israel

Under Israeli domestic tax law, WHT on payments of Israeli-source income is generally deducted at the corporate tax rate from all income remittances abroad, unless a tax certificate is obtained from the ITA authorising withholding-exempt remittances or a reduced rate of tax pursuant to an applicable tax treaty.

Set out below is a listing of WHT rates for dividends, interest, and royalties under domestic tax law and pursuant to tax treaties in force. Detailed rules apply under certain tax treaties for eligibility to the treaty-reduced rates (e.g. beneficial ownership, having no PE in Israel). The applicable tax treaty should be consulted to determine the relevant WHT rate and to examine detailed conditions that may apply for the specific circumstance. 

Israel has adopted the Multilateral Instrument (MLI) amendments to tax treaties. The changes to the DTTs provided for in the MLI will generally apply for those Israeli treaties when the country treaty partner has also ratified the MLI in their respective country and for those provisions on which both countries have not submitted reservations to the OECD. Therefore, in examining treaty eligibility for reduced WHT rates, it is important to examine the relevant treaty together with its MLI amendments as applicable (e.g. amended provisions regarding residency).

Notes

* Some Israeli tax treaties provide for an exemption from WHT on interest involving governmental and quasi-governmental parties. Such exemptions are not separately indicated in the table above.

1. Dividends between Israeli resident companies are generally exempt from Israeli tax. Dividends paid from a foreign resident company received via an Israeli payer (e.g. bank) are subject to WHT at the rate of 23% when paid to an Israeli resident company and at the rate of 25% when paid to an individual.
2. 30% rate applies in the case of a ‘substantial shareholder’, which is, in general, a shareholder that holds 10% or more of the rights of the company (detailed rules apply).
3. 10% where beneficial owner directly holds at least 25% of the capital of the company paying the dividends.
4. At a rate that is 50% of the rate that would have been imposed but for this provision but not to exceed 12.5% and not less than 7.5%. A 10% rate applies where paid from profits generated by an enterprise entitled to special tax rates under the Encouragement of Investment Law.
5. 5% if the beneficial owner is a company (other than a partnership) that directly holds at least 25% of the capital of the company paying the dividends; 10% rate if the beneficial owner is a company that directly holds at least 10% of the capital of the company paying the dividends where that latter company is a resident of Israel and the dividends are paid out of profits that are subject to tax in Israel at a rate that is lower than the normal rate of Israeli corporate tax; 15% rate applies in all other cases.
6. 5% if the beneficial owner is a company (other than a partnership) that directly holds at least 15% of the capital of the company paying the dividends; 15% rate in all other cases.
7. 0% if the beneficial owner is a company (other than a partnership) that directly holds at least 10% of the capital of the company paying the dividends; 5% rate in all other cases.
8. 5% if the beneficial owner is a company (other than a partnership) that directly holds at least 10% of the capital of the company paying the dividends; 10% rate if the beneficial owner is a company that directly holds at least 10% of the capital of the company paying the dividends where that latter company is a resident of Israel and the dividends are paid out of profits that are subject to tax in Israel at a rate that is lower than the normal rate of Israeli corporate tax; 15% rate in all other cases.
9. If the beneficial owner is a company (other than a partnership) that directly controls at least 10% of the voting power in the company paying the dividends, the rate is 5%, but increased to 10% if the dividends are paid out of profits which, by virtue of provisions in Israeli law for the Encouragement of Investment in Israel, are subject to a tax rate lower than the standard rate levied on the profits of a company resident in Israel; 15% rate in all other cases.
10. 5% if the beneficial owner is a company that directly or indirectly holds at least 10% of the capital of the company paying the dividends; 10% rate if the beneficial owner is a company that directly or indirectly holds at least 10% of the capital of the company paying the dividends and the dividends are paid out of profits that are subject to tax in Israel at a rate that is lower than the normal rate of Israeli corporate tax; 15% rate in all other cases.
11. At the domestic Israeli tax rate.
12. 5% if the recipient directly holds at least 10% of the capital of the company paying the dividends.
13. 10% if the beneficial owner is a company (other than a partnership) that directly holds at least 25% of the capital of the company paying the dividends.
14. 15% if the beneficial owner is a company (other than a partnership) that directly or indirectly holds at least 10% of the voting power of the company paying the dividends.
15. 5% if the beneficial owner is a company that owns at least 25% of the voting shares of the company paying the dividends during the period of six months immediately before the end of the accounting period for which the distribution of profits takes place.
16. 5% if the beneficial owner is a company that directly or indirectly holds at least 10% of the capital of the company paying the dividends; 10% rate if the beneficial owner is a company that holds 10% of the capital of the company paying the dividends and the dividends are paid out of profits that are subject to tax at a rate that is lower than the normal rate of the corporation tax; 15% rate in all other cases.
17. 5% if the beneficial owner is a company (other than a partnership) that directly holds at least 10% of the capital of the company paying the dividends; 10% rate if the beneficial owner is a company that directly holds at least 10% of the capital of the company paying the dividends where the dividends are paid out of profits that by virtue of provisions in the Israeli Law of Encouragement of Investments in Israel are exempt from tax or subject to tax at a rate that is lower than the normal rate of Israeli corporate tax; 15% rate in all other cases.
18. 5% if the beneficial owner is a company (other than a partnership) that directly holds at least 10% of the capital of the company paying the dividends; 10% rate if the beneficial owner is a company that directly holds at least 10% of the capital of the company paying the dividends and the dividends are paid out of profits that are subject to tax in Israel at a rate that is lower than the normal rate of Israeli corporate tax; 15% rate in all other cases.
19. 5% if the beneficial owner is a company that directly or indirectly holds at least 10% of the capital of the company paying the dividends.
20. 5% if the beneficial owner is a company (other than a partnership) that directly holds at least 25% of the capital of the company paying the dividends.
21. With respect to dividends paid to a company that directly holds at least 25% of the capital of the company paying the dividends: (i) 10% where the dividends are paid out of profits that, by virtue of provisions in Israeli law for the encouragement of investment in Israel, are exempted from tax or subject to tax at a rate that is lower than the standard rate levied on the profits of a company resident in Israel; (ii) 5% where paid out of regularly taxed profits. A 15% rate applies in all other cases.
22. 10% if the beneficial owner is a company (excluding partnership) that directly holds at least 10% of the capital of the paying company.
23. 5% if the recipient directly holds at least 15% of the capital of the company paying dividends.
24. 5% if the beneficial owner is a company (other than a partnership) that directly holds at least 25% of the capital of the company paying the dividends; 10% rate if the beneficial owner is a company that directly holds at least 25% of the capital of the company paying the dividends where that latter company is a resident of Israel and the dividends are paid out of profits that are subject to tax in Israel at a rate that is lower than the normal rate of Israeli corporate tax; 15% rate in all other cases.
25. 5% if the beneficial owner directly holds at least 10% of the capital of the company paying the dividends.
26. 5% if the recipient directly or indirectly holds at least 10% of the capital of the company paying the dividends.
27. 5% of the gross amount of the dividends if the beneficial owner is a company (other than a partnership) that directly holds at least 10% of the capital of the company paying the dividends; 10% of the gross amount of the dividends if the beneficial owner is a company that directly holds at least 10% of the capital of the company paying the dividends and the dividends are paid out of profits that, by virtue of law of the state in which the payer is a resident, are exempt from corporate tax or subject to corporate tax at a rate that is lower than the normal rate in that state; 15% of the gross amount of the dividends in all other cases.
28. 5% if the beneficial owner is a company (other than a partnership) that directly holds at least 10% of the capital of the company paying the dividends; 10% rate if the beneficial owner is a company that directly holds at least 10% of the capital of the company paying the dividends where that latter company is a resident of Israel and the dividends are paid out of profits that are subject to tax in Israel at a rate that is lower than the normal rate of Israeli corporate tax; 15% rate in all other cases.
29. 10% if the recipient holds at least 25% of the capital of the company paying the dividends.
30. 5% if the beneficial owner is a company (other than a partnership) that directly holds at least 25% of the capital of the company paying the dividends; 10% if the beneficial owner is a company that directly holds at least 10% of the capital of the company paying the dividends where that latter company is a resident of Israel and the dividends are paid out of profits that are subject to tax in Israel at a rate that is lower than the normal rate of Israeli corporate tax; 15% in all other cases.
31. 12.5% but only if (i) during the part of the paying corporation's taxable year that precedes the date of payment of the dividend and during the whole of its prior taxable year (if any), at least 10% of the outstanding shares of the voting stock of the paying corporation was owned by the recipient corporation, and (ii) not more than 25% of the gross income of the paying corporation for such prior taxable year (if any) consists of interest or dividends (other than interest derived from the conduct of a banking, insurance, or financing business and dividends or interest received from subsidiary corporations, 50% or more of the outstanding shares of the voting stock of which is owned by the paying corporation at the time such dividends or interest is received). A 15% rate applies for payments from income derived during any period for which the paying corporation is entitled to the reduced tax rate applicable to an AE under Israel's Encouragement of Capital Investments Law (1959). A 25% rate applies in all other cases.
32. WHT is generally at a rate of 15% if the loan/interest is not linked to any index. Interest paid on a bond to a shareholder who holds less than 10% of the rights of the company is generally taxed at a rate of 35%. A WHT rate of 47% applies in the case of a substantial shareholder (in general, a shareholder that holds 10% or more of rights of the company). An additional tax at a rate of 3% applies on an individual's income if the person's income from all sources in a tax year exceeds ILS 721,560 (in 2024). 
33. 5% for interest in connection with the sale on credit of any industrial, commercial, or scientific equipment or any loan of whatever kind granted by a bank. 
34. 5% for interest in the case of a bank or other financial institution.
35. 7% for interest received by any bank or financial institution.
36. 5% for interest paid on a loan granted by a bank.
37. 5% for interest paid on any loan of whatever kind granted by a bank.
38. 5% where in connection with the sale on credit of any industrial, commercial, or scientific equipment, or sale on credit of any merchandise by one enterprise to another enterprise, or on any loan of whatever kind granted by a bank loans made by banks; 10% in all other cases. An election can be made to be taxed on the net amount of the interest as if such interest were business profits.
39. 5% for interest paid in connection with the sale on credit of any industrial, commercial, or scientific equipment, sale on credit of any merchandise by one enterprise to another enterprise, or on any loan of whatever kind granted by a bank.
40. 7.5% for interest if received by any bank or financial institution.
41. 5% where paid on any loan of whatever kind granted by a bank.
42. 10% where paid to a bank or a financial institution.
43. 5% where paid in connection with the sale on credit of any industrial, commercial, or scientific equipment, or sale on credit of any merchandise by one enterprise to another enterprise, or on any loan of whatever kind granted by a bank.
44. 2% applies to government debt or government-assisted debt; 5% rate applies when paid to a financial institution; 10% rate applies in all other cases.
45. 5% in connection with the sale on credit of any industrial, commercial, or scientific equipment, or in connection with the sale on credit of any merchandise by one enterprise to another enterprise, or on any loan granted by a financial institution.
46. 7% for interest paid on any loan of whatever kind granted by a bank.
47. 10% for interest received by any financial institution (including an insurance company).
48. 10% for interest derived from a loan of whatever kind granted by a bank, savings institution, or insurance company or the like. 17.5% rate for other interest. An election may be made to be taxed on interest income as if that income were industrial and commercial profits.
49. 0% if the beneficial owner is a company (other than a partnership) that holds at least 10% of the capital of the company paying the dividends.
50. 5% for copyright royalties for literary, artistic, or scientific work (excluding cinematograph films) or for the use of, or the right to use, industrial, commercial, or scientific equipment or road-transport vehicles.
51. 0% for copyright royalties for literary, dramatic, musical, artistic, or scientific work (excluding in respect of films for cinema or television).
52. 15% for trademark royalties.
53. The rate is 50% of the rate that would have been imposed but for the treaty provision but not to exceed 12.5% and not to be less than 7.5%.
54. A new tax convention between Canada and the State of Israel is effective as of 1 January 2017 (in force since 21 December 2016). The new tax convention replaces the convention signed on 21 July 1975. Under the new tax convention, the following rates apply:
    • Dividends: The rate is 5% of the gross amount of dividends if the beneficial owner of the dividends is a company (other than a partnership) that directly holds at least 25% of the capital of the company paying the dividends; in all other cases, the rate is 15% of the gross amount of the dividends.
    • Interest: The rate is 5% of the gross amount of interest if the beneficial owner of the interest is a financial institution and is dealing at arm's length with the payer; in all other cases, the rate is 10% of the gross amount of the interest.
    • Royalties: The rate is 10% of the gross amount of the royalties; 0% for copyright royalties for and other like payments in respect of the production or reproduction of any literary, dramatic, musical, or artistic work (excluding royalties in respect of motion picture films and royalties in respect of works on film, videotape, or other means of reproduction for use in connection with television broadcasting); and 0% for royalties for the use of, or the right to use, computer software or any patent or for information concerning industrial, commercial, or scientific experience (but not including any such royalty provided in connection with a rental or franchise agreement).
55. For industrial, commercial, and scientific equipment royalties, the 10% rate applies to the adjusted amount of the royalties (70% of the gross amount of the royalties).
56. 0% for copyright royalties for literary, artistic or scientific work (excluding cinematograph films).
57. A new tax treaty between Israel and Germany is effective as of 1 January 2017 (in force since 9 May 2016). The new tax treaty replaces the treaty signed on 9 July 1962. Under the new tax treaty, the following rates apply:
    • Dividends will be taxable at a maximum rate of 5% if the beneficial owner is a company that directly holds at least 10% of the capital of the payer company; a 10% rate will apply in all other cases.
    • Interest will be taxable at a maximum rate of 5% and will be exempt in certain circumstances.
    • Royalties will be taxable only in the beneficial owner's state of residence.
58. 0% for copyright royalties for literary, artistic, or scientific work (excluding cinematograph films or tapes for television or broadcasting).
59. 2% for industrial, commercial, and scientific equipment royalties.
60. 5% for industrial, commercial, and scientific equipment royalties.
61. 10% for royalties for cinematograph films and films or video-tapes for radio or television broadcasting.
62. 5% for industrial, commercial, or scientific equipment royalties.
63. For royalties in respect of cinematograph or television films, the WHT rate shall not exceed tax at the rate applicable to companies on 15% of the gross amount of the royalty.
64. 5% for royalties for copyrights of literary, dramatic, musical, artistic work, or for the use of, or the right to use, industrial, commercial, or scientific equipment.
65. The definition of royalties does not include any royalty or other amount paid in respect of (i) the operation of a mine or quarry or of any other extraction of natural resources or (ii) in respect of cinematograph including television films.
66. 5% for royalties for literary, artistic, or scientific work, excluding cinematograph films or films or tapes used for radio, or television broadcasting.
67. For royalties in respect of cinematograph or television films, tax may be imposed in Israel, but not to exceed tax at the rate applicable to companies on 15% of the gross amount of the royalty.
68. 10% for copyright or film royalties.
69. 5% of the gross amount of the royalties where such royalties consist of payments of any kind received as a consideration for the use or the right to use any copyright of literary, artistic, or scientific work (excluding cinematograph films).
70. 5% for royalties for any patent, design or model, plan, secret formula, or for the use of, or the right to use, industrial, commercial, or scientific equipment, or for information concerning industrial, commercial, or scientific experience; 7.5% for technical fees; 15% for all other royalties.
71. 0% if the beneficial owner is a company (other than a partnership) that directly holds at least 10% of the capital of the company paying the dividends or where paid to certain qualifying pension funds.
72. 0% if to a pension fund or if paid on publicly traded corporate bonds or in respect of a loan, debt-claim, or credit guaranteed or insured by an institution for insurance or financing of international trade transactions that is wholly owned by Israel.
73. 0% if the beneficial owner is a company (other than a partnership) that directly holds at least 10% of the capital of the company paying the dividends where such holding is being possessed for an uninterrupted period of no less than one year and the dividends are declared within that period; or if the beneficial owner is the other contracting state or a central bank of that other state, or any other national agency or any other agency (including a financial institution) owned or controlled by the government of that other state; or where paid to certain qualifying pension funds. 10% in all other cases.
74. A resident of a contracting state may elect, in lieu of the tax that would be imposed, to make an election to be taxed on the interest income as if that income were business profits.
75. 0% if the beneficial owner is a company that directly holds at least 10% of the capital of the company paying the dividends; 15% in all other cases.
76. 5% if the beneficial owner is a pension fund; 20% if the distributing company is a real estate investment company and the beneficial owner owns less than 10% of the capital of the company paying the dividends; 15% for all other dividends.
77. 0% if to a pension fund or if paid on publicly traded corporate bonds or if the company paying the funds or the beneficial owner is one of the contracting states or one of their central banks, political subdivisions, or local authorities.
78. 5% of the gross amount of the dividends if the beneficial owner of the dividends is a company (other than a partnership or a real estate investment company) that directly holds at least 25% of the capital of the company paying the dividends; and 15% of the gross amount of the dividends in all other cases.
79. 5% paid for any patent, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial, or scientific equipment or for information (know-how) concerning industrial, commercial, or scientific experience.
80. 5% if the beneficial owner is a company (other than a partnership) that directly holds at least 25% of the capital of the company paying the dividends throughout a 365-day period that includes the day of payment of the dividend; 15% of the gross amount of the dividends in all other cases.
81. 5% for the use of, or the right to use, any copyright of literary, artistic, or scientific work, including cinematograph films or films or tapes used for radio or television broadcasting.
82. 5% if the beneficial owner is a company (other than a real estate investment fund that is a resident of Israel) that directly holds at least 10% of the voting power in the company paying the dividends throughout a 365-day period that includes the day of payment of the dividend (for the purposes of computing that period, no account shall be taken of changes of ownership that would directly result from a corporate reorganisation, such as a merger or divisive reorganisation, of the company that holds the shares or that pays the dividend).
83. 5% applies in the case of certain pension funds or financial institutions.
84. 5% if the beneficial owner is a company (other than a partnership) that directly holds at least 25% of the capital of the company paying the dividends throughout a 365-day period that includes the day of payment of the dividend.
85. 5% when for the use of, or the right to use, any copyright of literary, artistic, or scientific work, including cinematograph films or films or tapes used for radio or television broadcasting.
86. 5% if the beneficial owner of the dividends is a company (other than a partnership or a real estate investment trust) that directly holds at least 10% of the capital of the company paying the dividends throughout a 365-day period that includes the day of payment of the dividends (for the purpose of computing that period, no account shall be taken of changes of ownership that would directly result from a corporate reorganisation, such as a merger or divisive reorganisation, of the company that holds the shares or that pays the dividends).
87. 5% applies in the case of interest arising in one of the territories and paid on any loan of whatever kind granted by a bank that is a resident of the other territory.
88. The treaty was signed by both countries on 31 May 2021 and is effective 1 January 2022. 
89. 0% if the beneficial owner is a pension plan of the other contracting state or the government of the other contracting state that holds less than 5% of the capital of the company paying the dividends; 5% if the beneficial owner is the government of the other contracting state that holds at least 5% of the capital of the company paying the dividends; 5% if the beneficial owner is a company that directly holds at least 10% of the capital of the company paying the dividends throughout a 365-day period that includes the day of the payment of the dividends (for the purpose of computing that period, no account shall be taken of changes of ownership that would directly result from a corporate reorganisation, such as a merger or divisive reorganisation, of the company that holds the shares or that pays the dividends); 15% of the gross amount of the dividends in all other cases.
90. 5% if the beneficial owner of the interest holds 50% or more of the capital of the company paying the interest; 0% if the beneficial owner of the interest is a pension plan of the other contracting state or the government of the other contracting state; 10% in all other cases.
91. 5% of the gross amount of the dividends if the beneficial owner of the dividends is a company (other than a partnership or a real estate investment fund) that directly holds at least 25% of the capital of the company paying the dividends throughout a 365-day period that includes the day of the payment of the dividend (for the purpose of computing that period, no account shall be taken of changes of ownership that would directly result from a corporate reorganisation, such as a merger or divisive reorganisation, of the company that holds the shares or that pays the dividend).