Israel

{"ftc_utility":"high","fbar_trigger_notes":"Israeli bank accounts are required for practical daily life - nearly all employers pay salaries into local accounts, and landlords require local bank transfers. The $10,000 FBAR threshold is easily exceeded. Israeli banks are FATCA-compliant and report US account holders to the IRS. All Israeli financial accounts (bank, brokerage, pension/keren pensia, provident funds/kupat gemel) must be reported on FBAR and potentially on Form 8938. Israeli pension funds (keren pensia) and managers' insurance policies (bituach menahalim) raise complex FBAR and PFIC reporting questions.","ftc_utility_reason":"Israel has high income tax rates (up to 47% on income) and taxes Israeli-source income of residents. US citizens living in Israel and earning Israeli-source income will typically have substantial Israeli taxes to credit against their US tax liability. After the 10-year new immigrant exemption expires, Israeli tax on all worldwide income creates significant FTC opportunities. Even during the exemption period, Israeli taxes on Israeli-source income generate creditable taxes. The US-Israel income tax treaty and totalization agreement provide additional coordination mechanisms.","presence_day_count_notes":"Israel does not impose visa-based restrictions on US citizens. US citizens can reside in Israel indefinitely under the Law of Return if they qualify as Jewish or under standard visa procedures. The 330-day physical presence test is achievable. However, once an individual qualifies as an Israeli tax resident (generally 183+ days in a tax year, or center-of-life test), they become subject to Israeli worldwide tax obligations (subject to the 10-year new immigrant exemption if applicable). Days spent in Israel count normally for the 330-day test - no complicating exclusions apply.","typical_qualifying_method":"either","housing_exclusion_available":true,"physical_presence_test_applies":true,"estimated_housing_exclusion_usd":36000,"local_tax_rate_on_earned_income":0.47,"bona_fide_residence_test_applies":true}

{"pension_income":{"notes":"Israeli pension income is taxed as ordinary income at progressive rates up to 47%. However, significant exemptions apply - retirees over age 67 (men) or 62 (women) may exempt a substantial portion of pension income. In 2024, the exempt pension amount for individuals over the qualifying age was approximately ILS 8,900 per month (around ILS 106,800 per year). Amounts above the threshold are taxed at progressive rates. The 10-year new immigrant exemption covers foreign pension income.","tax_rate":null,"locally_taxed":true},"social_security":{"notes":"Under the US-Israel totalization agreement (in force since 1993), US Social Security benefits paid to Israeli residents are generally taxable only in the US under the treaty framework. Israel does not levy income tax on US Social Security benefits received by Israeli residents, though the position should be confirmed based on individual circumstances.","locally_taxed":false,"treaty_protection":true},"roth_distributions":{"notes":"Israel does not recognize the tax-exempt nature of Roth IRA distributions. Roth distributions may be treated as taxable income in Israel since the Israeli tax system does not have an equivalent concept. Olim in the 10-year exemption period would be exempt. After the exemption period, Roth distributions could be taxed as pension income or capital gains depending on characterization by the ITA. This is an area of ongoing ambiguity - US-Israeli dual citizens and residents should seek specific local advice.","locally_taxed":true},"us_401k_ira_distributions":{"notes":"The US-Israel tax treaty (in force since 1995) contains pension provisions. Distributions from US 401(k) and IRA accounts to Israeli residents are generally taxable in Israel as pension income at progressive rates, but the treaty limits the right of taxation. In practice, Israeli tax authorities have taken the position that US pension distributions are taxable in Israel for Israeli residents, and a credit for US withholding tax may be claimed. For olim in their 10-year exemption window, foreign pension income is fully exempt. After the exemption period, progressive income tax rates apply, though a 35% flat-rate option for certain pension income may be available depending on classification.","tax_rate":null,"locally_taxed":true,"treaty_protection":true}}

{"rate":0.25,"notes":"Individuals pay 25% on real capital gains on most assets, rising to 30% for shareholders holding 10% or more. Gains on assets purchased before 2003 use a blended calculation.","details":{"tax_type":"Capital Gains Tax","country_name":"Israel","country_iso_code":"ISR","source_references":["PwC Worldwide Tax Summaries - Israel","Israel Tax Authority (ITA)","Deloitte International Tax Source - Israel"],"last_verified_date":"2026-06-03","general_description":"Israel taxes capital gains as a separate schedule rather than as ordinary income. The standard rate for individuals on most assets (including securities) is 25%. Substantial shareholders (10%+ stake) pay 30%. Real estate gains are subject to a separate land appreciation tax (mas shevach) administered by the Israel Tax Authority, with rates varying based on acquisition date and asset type. Assets acquired before January 2003 benefit from a linear apportionment formula that applies the older tax rates (up to 20%) to the pre-2003 portion of the gain. Inflation adjustments (real vs. nominal gain) apply to most asset categories.","corporate_capital_gains":{"rate":0.23,"tax_treatment":"Corporate capital gains are generally taxed at the standard corporate income tax rate of 23%. No separate CGT regime applies to companies."},"individual_capital_gains":{"rate":0.25,"notes":"Gains on listed securities are typically subject to a 15% withholding at source for non-residents. Israeli residents pay 25% or 30% depending on ownership level.","tax_treatment":"Standard individual rate is 25%. Shareholders holding 10% or more in a company pay 30%. Real estate is subject to land appreciation tax with rates depending on acquisition date. Pre-2003 assets receive blended rate treatment.","real_estate_rate":"Variable - see notes","inflation_adjustment":true,"substantial_shareholder_rate":0.3}}}

{"notes":"Israeli resident individuals pay 25% on dividends, rising to 30% for substantial shareholders (10%+ stake). A 15% rate applies to dividends from approved enterprises under the Law for the Encouragement of Capital Investments. Non-residents are generally subject to 25% withholding, though tax treaties may reduce this.","rates":[{"rate":0.25,"type":"flat","notes":"Standard rate for individual residents receiving dividends"},{"rate":0.3,"type":"flat","notes":"Rate for substantial shareholders - individuals holding 10% or more in the paying company"},{"rate":0.15,"type":"flat","notes":"Reduced rate for dividends from approved/benefited enterprises under the Law for the Encouragement of Capital Investments"},{"rate":0.25,"type":"withholding","notes":"Default withholding on dividends paid to non-residents, subject to treaty reduction"}]}