Israel’s tax year 2026 ends on 31 December 2026, and most tax benefits depend on what was actually paid or distributed by then. Before year-end, business owners should review pension and study fund (keren hishtalmut) deposits, donations under section 46, dividend decisions in closely held companies under Amendment 277, surtax exposure above ILS 721,560, inventory counts, bad debts and advance tax payments.
In Israel the tax year is the calendar year, so tax year 2026 closes on 31 December 2026. Many tax outcomes are fixed by what actually happened by that date: money deposited into a pension fund, a donation that cleared, a dividend that was distributed and taxed. From 1 January 2027 you can no longer change them for 2026. This checklist is written for English-speaking business owners, including olim who run a business or own an Israeli company. All figures below are the Israel Tax Authority’s figures for tax year 2026 only; for later years, check the updated amounts.
How timing works depends on your reporting method. A business reporting on a cash basis usually records income when payment is received; one reporting on an accrual basis records it when the work or sale takes place. Before the year closes:
If you are self-employed and new to the system, the overview of what taxes a self-employed person pays in Israel explains how income tax, National Insurance and VAT fit together.
Under the Income Tax Ordinance, a self-employed person who pays into a pension fund gets two benefits: part of the deposit is deductible from income (section 47) and part earns a 35% tax credit (section 45A). The benefit applies to amounts paid during the tax year, so a deposit that reaches the fund in January 2027 does not count for 2026. Israeli law also requires self-employed individuals to make a minimum pension deposit based on their income.
Estimate your 2026 taxable income, check what you have already deposited, and pay any top-up early enough in December for the fund to receive it in 2026. The exact pension ceilings depend on your income level, so it is worth running the calculation with your accountant or pension agent.
A self-employed person can deposit into a study fund in their own name and deduct up to 4.5% of income. According to the Israel Tax Authority’s 2026 tables, the income ceiling for this deduction is ILS 293,397 per year, which means a maximum deduction of about ILS 13,203 in 2026. If your income is below the ceiling, the 4.5% is calculated on your actual income. Again, the deposit must be made within the tax year.
Donations to a public institution approved under section 46 earn a tax credit: 35% of the donation for individuals, and the corporate tax rate for companies. For tax year 2026:
For owners of a closely held company (a “few-shareholder company”), this is often the key year-end decision. Under section 81B of the Ordinance, added by Amendment 277, such a company pays an additional 2% tax on its excess profits, after deducting dividends distributed during the tax year. The additional tax does not apply for a year in which, among other conditions:
Because the test looks at distributions within the year, a dividend declared in January 2027 will not help for 2026. Before deciding, consider the personal tax on the dividend as well. The guide on how dividends from an Israeli company are taxed covers the shareholder side, and what an Israeli company must file each year covers the reports that follow.
In tax year 2026, an individual whose taxable income exceeds ILS 721,560 (ILS 60,130 a month) pays an additional 3% on the part above that amount. Capital income above the same threshold, such as dividends, interest and capital gains, bears a further 2%, for 5% in total. The threshold was frozen for 2025 to 2027. A large dividend received in a single year can push you over the threshold, so the size and timing of distributions matter.
Year-end is also a good time to check that clients who pay you have a valid withholding certificate from you for the new year, so that tax is not withheld at the full rate. See what withholding tax at source is and how to get a certificate.
If you would like to go through this list in English before the year closes, our English-speaking accountant service can help.
The Israeli tax year is the calendar year, so tax year 2026 ends on 31 December 2026. Deposits, donations and dividends made after that date generally count for 2027.
Up to 4.5% of income, with an income ceiling of ILS 293,397 for 2026. The maximum deduction is therefore about ILS 13,203, provided the deposit is made during 2026.
ILS 721,560 of taxable income for the year. Above it, an additional 3% applies, plus a further 2% on capital income such as dividends. The threshold was frozen for 2025 to 2027.
No. Section 81B deducts dividends distributed during the tax year itself, so a distribution intended for 2026 must take place by 31 December 2026.