Layer one: corporate tax
An Israeli-resident company pays corporate tax at 23% on taxable profit. A company is Israeli-resident if it is incorporated in Israel or managed and controlled from Israel. Capital gains of a company are generally taxed at the same 23% rate.
Layer two: dividends to individuals
| Shareholder | Dividend tax (general) | Combined with 23% corporate tax |
|---|---|---|
| Individual, under 10% | 25% | about 42.25% |
| Individual, 10%+ holder | 30% | about 46.1% |
High-income individuals also pay surtax: 3% on annual income above the threshold, with an additional 2% on capital income such as dividends and gains above the threshold from 2025. Combined burdens can approach 50% at the top.
Dividends to companies and foreign shareholders
- Dividends between Israeli companies from Israeli-sourced profits are generally exempt.
- Dividends to foreign shareholders are subject to Israeli withholding; tax treaties can reduce the rate, sometimes substantially for corporate parents.
- Dividends from preferred-enterprise income have special, often reduced, withholding rates.
Salary vs. dividends for owner-managers
Salary is deductible for the company but taxed at personal rates up to 47% plus National Insurance. Dividends are not deductible but taxed at 25%–30%. The optimal mix depends on your income level, pension planning and National Insurance caps, and is usually re-modelled every year.
The Tax Authority also has rules for closely held companies that can attribute profits to shareholders, so very large retained profits in a 'service company' deserve careful review.
Incentive regimes
- Preferred Enterprise: reduced corporate rates for qualifying industrial and export activity (lower in Development Area A).
- Preferred Technology Enterprise: 12% on qualifying IP income (7.5% in Development Area A), and 6% for very large groups in some cases.
- Reduced withholding on dividends paid out of benefited income.
Eligibility has detailed conditions; a ruling or pre-check is common before relying on these rates.
Compliance basics
- Monthly or bi-monthly advance payments based on turnover.
- Annual audited financial statements and corporate return.
- Withholding on dividends, salaries and certain supplier payments.
Further reading
This guide is general information, not advice for your situation. Tax rates and thresholds change; confirm current figures before acting. Tax-IL advises on tax structure and registrations; bookkeeping, payroll and banking are handled by your accountant and bank.
Not sure how this applies to you?
One free 15-minute call. Tell us the situation in a line — we'll reply with the specific rule that applies to you.
- Licensed Israeli tax advisors
- Reply within one business day
- Confidential — never shared