Israeli resident companies pay corporate income tax at 23% on their worldwide income, and qualifying technology and industrial companies can pay reduced rates under the Encouragement of Capital Investments Law. The standard VAT rate has been 18% since January 2025, with exports generally zero-rated. Related-party international transactions must follow arm's-length transfer pricing rules.
The standard Corporate Income Tax rate in Israel in 2026 is 23%. This applies to worldwide income of Israeli resident companies and Israeli-sourced income of non-resident companies.
Under the Law for the Encouragement of Capital Investments, technology and industrial companies (especially exporters) may qualify for significantly reduced rates:
The standard VAT rate is 18% (raised from 17% on 1 January 2025). Exports of goods and services and certain intangible assets sold to non-residents are generally zero-rated.
Israel adheres to OECD guidelines. Section 85A of the Ordinance requires that international transactions between related parties be conducted at arm's length. Form 1385, a declaration of international transactions, is filed annually with the tax return, and a transfer pricing study must be provided when the Tax Authority requests it.
The standard rate is 23%. Israeli resident companies pay it on worldwide income, and non-resident companies on their Israeli-sourced income.
The standard rate is 18%, raised from 17% on 1 January 2025. Exports of goods and services, and certain intangibles sold to non-residents, are generally zero-rated.
Yes. Section 85A of the Income Tax Ordinance requires related-party international transactions to be at arm's length, in line with OECD guidelines. Form 1385 is filed annually with the return, and a transfer pricing study must be provided on request.
An Israeli company pays corporate tax on its profit, and further tax is due when profit is paid out to the owners as salary or dividends. A self-employed person pays personal income tax on all of the business profit, plus National Insurance. Which structure is better depends on the profit level and how much of it the owner needs to draw.