Israel

Individual - Foreign tax relief and tax treaties

Last reviewed - 25 January 2020

Foreign tax relief

Double taxation is avoided by way of a foreign tax credit mechanism that applies unilaterally in the absence of an applicable DTT. The foreign tax credit is limited to the Israeli tax payable with respect to the same income. Foreign-sourced income is divided into categories (baskets) on the basis of the income source (e.g. dividends, business income), and a particular credit limitation applies to each basket. Excess uncredited foreign income can be carried forward for the subsequent five tax years.

Foreign residents are not entitled to unilateral tax relief on foreign income. However, in circumstances where it can be shown that the amount of tax payable in Israel exceeds the amount of tax credit available in the home country on specific Israeli-source income, the Minister of Finance is permitted to order a total or partial tax reduction.

Tax treaties

See the Withholding taxes section in the Corporate summary for a list of countries with which Israel has a DTT.