Israel

Research notes

Israel — family-office tax dossier

Last reviewed: 2026-10-16 Tax year: 2026 Reviewer: research agent (Claude), unreviewed by a tax adviser

Summary

Israeli residents pay 25% on real capital gains on shares and on dividends (30% for 10%+ shareholders), plus a 3% surtax and, since 2025, an extra 2% surtax on capital income above ILS 721,560 (2026), so a large investor pays 30% on gains and dividends. There is no inheritance, estate, gift or wealth tax. New immigrants (olim) and senior returning residents after 10 years abroad are exempt for 10 years on foreign passive income and on gains from foreign assets; those arriving from 2026 must now report that exempt income. Immigration is open mainly to people eligible under the Law of Return.

US citizens: US citizens remain US-taxed. The US-Israel treaty (saving clause) lets the US tax citizens fully; Israel's 10-year exemption does not reduce US tax. Israeli 30% on gains/dividends is generally creditable against the US 23.8%.

Residence and eligibility

Centre-of-life test; rebuttable presumptions at 183 days in the year, or 30 days in the year plus 425 days over the year and two prior years. New immigrants and returning residents after 10 years abroad have a 1-year acclimation period and may elect within 90 days not to be resident. Exit tax applies on ceasing residence.

• Aliyah under the Law of Return (EU, US, OTHER): Open to Jews, their children and grandchildren and spouses; grants citizenship. Not verified in this session in detail.
• Other foreigners (EU, US, OTHER): No investor residence programme; non-Jewish foreigners generally cannot settle except through marriage or work permits (general knowledge, not verified).

Capital gains

Standard regime

Real (inflation-adjusted) gains on shares acquired from 2003 are taxed at 25%, or 30% for a substantial (10%+) shareholder. A 3% surtax applies to taxable income above ILS 721,560 (2026) and, from 2025, an additional 2% surtax on capital income (gains, dividends, interest, rent) above the same threshold: top rate 30% (35% for substantial shareholders).

• Exemptions and thresholds: Surtax threshold ILS 721,560 (2026). Inflation adjustment of the cost base (real gain).
• Important exceptions, statute references and announced changes: Israeli real estate is taxed under the Land Appreciation Tax Law (generally 25% on post-2001 real gains; one exempt residential apartment sale under conditions; rates not verified in this session). Exit tax provisions apply on ceasing residence (mechanics not verified in this session). Shares bought before 2003: blended rate.
• Tax year / confidence / verification: 2026 / medium / partially_verified (checked 2026-10-15)
• JSON numbers: headline 30% (0.3); listed domestic 30% (0.3); listed foreign 30% (0.3); private business sale 35% (0.35); local real estate 30% (0.3); foreign real estate 30% (0.3).
• How derived: Portfolio shares: 25% + 3% surtax + 2% capital-income surtax = 30% on the part above ILS 721,560. Private business (10%+ holder): 30% + 5% = 35%. Real estate: assumed 25% land appreciation/real gain rate + 5% surtax = 30% (LAT rate not verified from an opened source). Real gains only (inflation-indexed cost).
• Holding period: None; real gain computed with CPI indexation.
• Trader recharacterisation: Gains from business-like trading are ordinary income at marginal rates up to 47% + surtaxes.
• Foreign assets: Worldwide gains taxed with foreign tax credit; exit tax on emigration.

New immigrant (oleh) / senior returning resident - 10-year exemption (special regime)

Gains on assets located abroad sold within the 10-year period are exempt; Israeli assets are taxed normally.

• Important exceptions, statute references and announced changes: After 10 years, gains on foreign assets are split by time (ITO s. 97(b)(3)): the real gain multiplied by the days from acquisition to the end of the 10 years, divided by the days from acquisition to sale, stays exempt, and the rest is taxed at the s. 91(b) rate. New residents from 2026 must report the exempt income.
• Tax year / confidence / verification: 2026 / high / partially_verified (checked 2026-10-15)
• JSON numbers: headline 30% (0.3); listed domestic 30% (0.3); listed foreign 0% (0.0); private business sale 35% (0.35); local real estate 30% (0.3); foreign real estate 0% (0.0).
• How derived: Foreign assets exempt for 10 years (Income Tax Ordinance s. 14(a) and s. 97(b)(1)); Israeli assets as standard.

Land appreciation tax (Deloitte 2026): real betterment accrued after 1 January 2012 is taxed at up to 25% (30% for a 10%+ holder of a real estate company); for residential apartments pre-2014 betterment is exempt and a sole apartment can be fully exempt. Purchase tax: 6% generally; 0-10% progressive for a sole residential apartment. This confirms the 0.30 real-estate rate (25% + 5% surtaxes above ILS 721,560), and capital_gains confidence was raised to high.

Dividends

Standard regime

Dividends are taxed at 25% (30% for a 10%+ shareholder) plus the 3% and 2% surtaxes on income above ILS 721,560: 30% at the top for portfolio holdings. Foreign dividends are taxed at the same rate with credit for foreign tax.

• Exemptions and thresholds: Surtax threshold ILS 721,560 (2026).
• Important exceptions, statute references and announced changes: Dividends from approved/preferred enterprises: 15-20%. Family companies: from 2025 a 2% annual tax on certain accumulated profits unless distributed.
• Tax year / confidence / verification: 2026 / high / partially_verified (checked 2026-10-15)
• JSON numbers: headline 30% (0.3); domestic 30% (0.3); foreign gross 30% (0.3); foreign tax relief: credit.
• How derived: 25% + 3% + 2% surtax = 30% for a portfolio investor whose income exceeds ILS 721,560.
• Outbound withholding: 25% (30% for substantial shareholders) on dividends to non-residents, reduced by treaty.
• Treaty network: About 60 treaties (PwC table), including the US (12.5%/15%/25%).
• Holding companies: Companies pay 23% (2026); distributions add 25-30% dividend tax. Closely held 'family' companies face income attribution and a 2% tax on accumulated profits from 2025. No holding structure is modelled: 23% company tax plus 25-30% dividend tax on payout (and surtax) exceeds the 30% top rate on direct holding, and the closely held company rules remove most of the deferral.

New immigrant (oleh) / senior returning resident - 10-year exemption (special regime)

Foreign dividends exempt for 10 years; Israeli dividends taxed as standard.

• Tax year / confidence / verification: 2026 / high / partially_verified (checked 2026-10-15)
• JSON numbers: headline 30% (0.3); domestic 30% (0.3); foreign gross 0% (0.0); foreign tax relief: exemption.
• How derived: Foreign passive income exempt during the 10-year period.

Inheritance and gifts to children

Standard regime

No estate, inheritance or gift tax (inheritance tax abolished in 1981). Heirs inherit the deceased's cost basis, so gains are taxed when the heir sells. Gifts are generally exempt from income tax for the recipient, but the donee takes over the donor's cost and holding period.

• Exemptions and thresholds: No tax of any amount.
• Important exceptions, statute references and announced changes: Gifts of Israeli real estate can attract purchase tax at a reduced rate (one third for gifts to children; general knowledge, not verified). Inherited assets carry over the original cost, so embedded gains remain taxable on sale.
• Tax year / confidence / verification: 2026 / high / verified (checked 2026-10-15)
• JSON numbers: basis none, children fully_exempt, exemption 0 ILS, brackets (marginal): none; other transfer costs 0% (0.0).
• Gifts: None; donee inherits the donor's cost basis. (same as inheritance: True; tax-free after years: None)
• Foreign assets: No tax.
• Residence/domicile rules: Not applicable.
• Business relief covers listed shares: False

Wealth tax

Standard regime

No net wealth tax.

• Tax year / confidence / verification: 2026 / high / verified (checked 2026-10-15)
• JSON type: none
• Property tax (not a wealth tax): Municipal tax (arnona) on occupiers of property. Purchase tax on real estate acquisitions (rates not verified).

Special regimes

• New immigrant (oleh) / senior returning resident - 10-year exemption (new_immigrant; EU, US, OTHER; duration 10 years): For 10 years from becoming resident, foreign passive income (dividends, interest, rent, pensions) and gains on foreign assets are exempt; gains on assets sold after the 10 years are apportioned. Residents from 1 January 2026 must report the exempt foreign income (the reporting exemption no longer applies). An optional first 'acclimation' year allows electing non-residence. Eligibility: An individual who becomes an Israeli resident for the first time, or a veteran returning resident (an Israeli resident again after at least 10 consecutive years abroad), Income Tax Ordinance s. 14(a). The statute ties the exemption to first-time residence, not to Law of Return status or religion, so a non-Jewish EU citizen who becomes resident for the first time can qualify in tax terms; the practical barrier is obtaining residence at all (Israel has no investor-residence route, and non-Jewish foreigners generally need a work permit or a family link; not verified). Assets that reached the individual as a tax-exempt gift under s. 97(a)(5) are excluded from the asset exemption.
• Metrics that differ from standard: capital_gains, dividends (details in the tax sections above).

Re-verified 2026-10-15 (Deloitte Israel Highlights 2026, April 2026, agreeing with PwC): the exemption for foreign-source income of new residents and senior returning residents lasts 10 years from arrival. Arrivals before 1 January 2026 need not report the exempt foreign income for the benefit period; arrivals from 1 January 2026 must report it. The ITA may require a capital statement of Israeli assets in any case. A foreign company managed by the new resident is generally not Israeli-resident for 10 years, subject to permanent-establishment risk. Separately, arrivals between 5 November 2025 and 31 December 2026 get a 2026-2030 tax holiday on active income from personal activity in Israel up to ILS 600,000 (2026), ILS 1m (2027, 2028), ILS 350,000 (2029) and ILS 150,000 (2030), conditional on residence and 75+ days a year in 2028-2029; it does not cover investment income. The Israel Tax Authority's own pages on gov.il returned 403 to automated access, so no official page was opened.

Holding structures

No holding structure is modelled. A company pays 23% (2026) and distributions add 25-30% dividend tax plus surtax, more than the 30% top rate on direct holding, and the closely held company rules (income attribution and the tax on accumulated profits from 2025) remove most of the deferral. See holding_company_notes.

Company taxation (kept separate from personal tax)

Headline CIT rate: 23% (0.23). 23% CIT (2026); reduced rates for preferred enterprises/technology companies under the Encouragement of Capital Investments Law. QDMTT for groups with revenue of EUR 750 million or more from tax years beginning after 31 December 2025. From 2025, closely held companies face attribution of excess profits and a 2% tax on certain accumulated profits.

Cost of living notes

City: Tel Aviv.

• prime_rent_monthly: 17,000 ILS (2026). Median monthly asking rent of the five 4.5-6-room apartments (3.5-5 bedrooms) in north Tel Aviv (Old North, Kikar HaMedina, Nofei Yam, Ramat Aviv Gimel, Lamed) on the first Tel Aviv results page of homeless.co.il on 15 Oct 2026; range ILS 11,699-22,000. Small sample of asking prices; detached houses are rare in Tel Aviv (families choosing a villa usually look at Herzliya Pituach or Kfar Shmaryahu, not sourced). Source: Apartments for rent in Tel Aviv.
• intl_school_annual_fee: 152,700 ILS (2026). Walworth Barbour American International School (Even Yehuda, about 25 km north of Tel Aviv), High School grades 9-12 tuition 2026-27 for privately paying families; plus annual capital fee ILS 10,900 (total ILS 163,600) and a one-time ILS 20,000 registration fee. Source: WBAIS - Tuition and fees 2026-2027.
• Yad2 and Madlan blocked automated access. Purchase prices, health insurance and housekeeper costs not sourced.

Open questions

• Whether any further curtailment of the 10-year exemption (beyond the 2026 reporting requirement) has been enacted was not verified.
• Capital marker omitted because of the disputed status of Jerusalem; Tel Aviv is used as the financial centre.
• Israel Tax Authority pages (gov.il) refused automated access (403); figures rest on PwC (June 2026) and Deloitte Israel Highlights 2026 (April 2026), which agree on rates, the surtaxes and the 10-year exemption with 2026 reporting change.
• Israel Tax Authority pages on gov.il could not be opened (Cloudflare 403); the 10-year exemption and the 2026 reporting change rest on PwC and Deloitte (Israel Highlights 2026, April 2026), which agree. Income Tax Ordinance s. 14(a) and s. 97(b)(1) and (3) were opened in the ICNL unofficial English translation (its capital-gains and dividend rates predate 2012 and were not used); Amendment 272 (reporting) was not opened. The Tax Authority's practice for first-time residents who are not olim was not verified.

Sources

• Israel - Individual - Income determination (PwC Worldwide Tax Summaries, professional): https://taxsummaries.pwc.com/israel/individual/income-determination
• Israel - Individual - Taxes on personal income (PwC Worldwide Tax Summaries, professional): https://taxsummaries.pwc.com/israel/individual/taxes-on-personal-income
• Israel - Corporate - Withholding taxes (PwC Worldwide Tax Summaries, professional): https://taxsummaries.pwc.com/israel/corporate/withholding-taxes
• Israel - Individual - Other taxes (PwC Worldwide Tax Summaries, professional): https://taxsummaries.pwc.com/israel/individual/other-taxes
• Inheritance tax (country overview) (Wikipedia, other): https://en.wikipedia.org/wiki/Inheritance_tax
• Israel - Individual - Other tax credits and incentives (PwC Worldwide Tax Summaries, professional): https://taxsummaries.pwc.com/israel/individual/other-tax-credits-and-incentives
• Israel - Individual - Residence (PwC Worldwide Tax Summaries, professional): https://taxsummaries.pwc.com/israel/individual/residence
• Israel - Corporate - Taxes on corporate income (PwC Worldwide Tax Summaries, professional): https://taxsummaries.pwc.com/israel/corporate/taxes-on-corporate-income
• Income Tax Ordinance [New Version] 5721-1961, unofficial English translation (ICNL, legislation): https://www.icnl.org/wp-content/uploads/Israel_Ordinance.pdf
• Israel Highlights 2026 (updated April 2026) (Deloitte International Tax, professional): https://www.deloitte.com/content/dam/assets-shared/docs/services/tax/2026/dttl-tax-israelhighlights-2026.pdf
• Apartments for rent in Tel Aviv (homeless.co.il, other): https://www.homeless.co.il/rent/city=%d7%aa%d7%9c%20%d7%90%d7%91%d7%99%d7%91
• WBAIS - Tuition and fees 2026-2027 (Walworth Barbour American International School, other): https://www.wbais.net/admissions/tuition-and-fees

Change log

• 2026-10-15: initial research.
• 2026-10-15: reviewed special-regime durations: new immigrant exemption 10 years (unchanged).
• 2026-10-15: data-quality pass: added rent (north Tel Aviv 4.5-6-room apartments, homeless.co.il sample) and school fee (WBAIS 2026-27); added Deloitte Israel Highlights 2026 as a second source (gov.il ITA pages blocked automated access); land appreciation tax rates confirmed and standard capital_gains confidence raised to high; new-immigrant eligibility conditions, 2026 reporting rule and the separate 2026-2030 tax holiday for active income documented.
• 2026-10-15: reviewed holding structures; none modelled; added a Holding structures section.
• 2026-10-15: family rent re-checked against the upper-middle-class standard: kept.
• 2026-10-16: recipe drafted. The 10-year exemption (new_immigrant) is tied by ITO s. 14(a) to becoming resident for the first time (or a veteran returning resident), not to the Law of Return: eligibility text corrected, s. 97(b)(3) apportionment formula added, statute references now opened (ICNL translation).