Israel

National insurance contributions

Resident employees

Employees’ national insurance contribution for resident employees is 0.4% on the first ILS 7,522 of income per month and 7% on the difference between ILS 7,522 and the maximum monthly compensation amount of ILS 49,030.

Employers' national insurance contribution for resident employees is 3.55% on the first ILS 7,522 of income per month and 7.6% on the difference between ILS 7,522 and the maximum monthly compensation amount of ILS 49,030.

Non-resident employees

Employees’ national insurance contribution for non-resident employees is 0.04% on the first ILS 7,522 of income per month and 0.87% on the difference between ILS 7,522 and the maximum monthly compensation amount of ILS 49,030.

Employers' national insurance contribution for non-resident employees is 0.59% on the first ILS 7,522 of income per month and 2.65% on the difference between ILS 7,522 and the maximum monthly compensation amount of ILS 49,030.

Special rules and rates

Special detailed rules and rates regarding national insurance contributions apply to irregular salary payments, the self-employed, and to other sources of income generated by an Israeli resident (i.e. rent, interest, dividends, pension, etc.). Capital gains are not subject to national insurance contributions.

Health insurance tax

Health insurance tax is levied at 3.10% on the first ILS 7,522 and at 5% on the difference between ILS 7,522 and the maximum monthly compensation amount of ILS 49,030. Non-residents are not subject to health insurance tax.

Special detailed rules and rates regarding health insurance tax apply to irregular salary payments, the self-employed, and to other sources of income generated by an Israeli resident (i.e. rent, interest, dividends, pension, etc.). Capital gains are not subject to health insurance tax.

Land appreciation tax (LAT)

LAT is imposed on gains from the sale of Israeli real estate. LAT is also imposed on the sale of an interest in a non-traded real estate association (REA), defined as a company or partnership whose principal assets consist of Israeli real estate. However, the tax liability arising from the sale of such an association will be determined based on the capital gains tax provisions of the Israeli ITO. For LAT purposes, a sale includes most types of dispositions, as well as the grant of a lease capable of lasting for 25 years or more.

In measuring the lease period, an option to lease is considered as if exercised. Detailed expenditure deduction rules are prescribed for LAT purposes.

The resulting taxable capital gain is divided into real and inflationary elements.

The real capital gain is taxable as follows (these guidelines do not apply with respect to the sale of residential apartments in Israel - detailed rules apply):

Assets purchased from 1 January 2012 and thereafter

The tax rate applicable to real capital gains derived from the sale of an interest in real estate for individuals is 25%. The tax rate applicable to real capital gains derived from the sale of an interest in an REA is 25%, or 30% in the case of a 10% or more shareholder.

Assets purchased prior to 1 January 2012

• Capital gains arising from the sale of an interest in real estate (and in REAs) shall be apportioned on a linear basis to the periods before and after 7 November 2001.
• The portion of the gain attributed to the period before 7 November 2001 shall be subject to tax for individuals at the taxpayer's marginal tax rate, up to 50% (including surtax) depending on the date of acquisition.
• The portion of the gain attributed to the period from 7 November 2001 until 31 December 2011 shall be taxed at the rate of 20% for individuals.
• The portion of the gain attributed to the period from 1 January 2012 until the date of the sale shall be taxed at the rate of 25% for individuals (or at the rate of 30% with respect to the sale of an interest in an REA if the individual is a 10% or more shareholder).

Consumption taxes

Value-added tax (VAT)

The current rate of VAT is 17%. See the Other taxes section in the Corporate tax summary for more information.

Net wealth/worth taxes

Israel does not have a net wealth/worth tax.

Inheritance, estate, and gift taxes

Israel does not have any estate or inheritance taxation.

Israel does not impose a special gift tax on the gifting of assets.

Property taxes

Property taxes are generally imposed on the occupier of commercial and residential property. Unoccupied property is generally taxed on the property's owner. The tax is imposed at the municipality level.

Luxury and excise taxes

Israel imposes an additional 3% on personal income at the highest marginal rate (which increases the highest tax marginal rate from 47% to 50%).

A luxury tax is also imposed on the purchase of certain yachts and luxury cars.

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.