Tax and Israeli Companies
This article addresses the issue of tax and Israeli companies. Our law firm, Cohen, Decker, Pex & Brosh, specializes in Israeli corporate and commercial law. In Israel this falls under the auspices of the Israeli Corporations Authority.
VAT Tax and Israeli Companies
Unlike the United States, Israel has a system of value added tax which is identical to the French system. The company collects value added tax (VAT) on its turnover and deducts the VAT paid on its expenses. The current VAT rate in Israel is 17% (as of December 2018). VAT must be paid before the 15th of the following month for companies whose turnover exceeds 1.5 million NIS (or those legally obliged to use double-entry bookkeeping) and once every two months for other companies. Companies with an annual turnover of less than 99,000 NIS (in Hebrew, osek patur) are exempt from VAT. Regardless of income, all companies must report their annual income at the end of the year.
Our law firm often helps companies open a VAT file with the assistance of a local CPA as well as with the electronic declaration and monthly electronic payment. A foreign company must appoint a tax representative for the declaration and payment of VAT in Israel. Our law firm can assist with any of these steps, as needed.
Corporate Tax and Israeli Companies
The corporate tax rate in Israel is 23%, and the dividend tax rate is 30%. This is why some foreign companies seek to establish businesses in Israel where the tax rate is lower than their home countries.
Tax rate reductions are available (at the rate of 10-15%) depending on the location of the business. Our law offices can provide further information on this as companies decide where they would like to set up their business.
Taxation of Dividends in Israeli Companies
Dividends paid by Israeli companies to their Israeli parent company are exempt from tax. Dividends paid to individuals are subject to a levy of 25-30% if the shareholder holds more than 10% of the capital in the distributing company.
If you have questions related to tax and Israeli companies or anything else on Israeli company law, feel free to contact us. We also provide more information on other topics related to Israeli company law on our website.