Israel Income Tax Rates 2026: Individuals, Companies, Capital Gains and VAT

Israel individual income tax rates for 2026

Under section 121 of the Income Tax Ordinance [New Version], 1961, taxable employment and business income is generally charged at progressive marginal rates. Each rate applies only to income within that band; the highest rate is not charged on all income.

The brackets above relate to income from personal exertion, including employment and qualifying business income. Passive income can be subject to different minimum rates and special regimes, particularly for persons under age 60.

High-income surtax: section 121B

In 2026, a 3% additional tax generally applies to an individual's annual taxable income above NIS 721,560. A further 2% tax on capital-source income above the relevant threshold has applied since 2025. The additional 2% is not imposed on ordinary employment or active business income solely because it exceeds the threshold. Thus, the combined surtax on qualifying high capital income can reach 5%, subject to the statutory calculation.

Tax credit points and Form 101

Israeli resident individuals generally receive 2.25 basic credit points, while eligible women generally receive an additional half point. The monetary value of one credit point in 2026 is NIS 242 per month. Other credits may be available for children, qualifying new immigrants, studies and personal circumstances. Employees ordinarily report relevant circumstances to their employer using Form 101. Eligibility and timing vary by benefit.

Tax residency, non-residents and foreign-source income

Under the Income Tax Ordinance, an Israeli tax resident is generally subject to tax on worldwide income; a non-resident is generally taxed only on Israeli-source income. Individual residency is based on the center-of-life test, supported by statutory day-count presumptions, including presence for 183 days or more in a tax year, or 30 days or more in that year together with 425 days or more across that year and the preceding two years. The presumptions may be rebuttable.

Israeli-source employment, business income, interest, dividends, royalties and property income may be taxable to non-residents. The applicable double taxation agreement, beneficial ownership, exemptions and withholding rules must be examined before assuming any treaty-reduced rate. There is no universal 10% non-resident tax rate.

New immigrants and qualifying returning residents may receive special relief. Rules on reporting certain foreign-source exempt income have changed for persons becoming residents after 31 December 2025; professional review is important.

Capital gains, dividends, interest and rental income

Capital gains: Under Part E of the Income Tax Ordinance, a typical individual capital gain is taxed at 25%, or 30% for a substantial shareholder in relevant cases. A substantial shareholder generally holds at least 10% of specified control rights. Asset type, acquisition date, exemptions and inflationary components can change the result.

Dividends: Individual dividends are generally subject to 25% tax, or 30% for substantial shareholders, subject to exceptions and applicable treaty provisions. The section 121B surtaxes may increase the effective tax burden at higher income levels.

Interest: Depending on the instrument and whether the return is linked to an index, individual interest may be taxed under preferential 15% or 25% rules or at ordinary marginal rates. No single rate applies to all savings products.

Residential rental income: A qualifying residential rental arrangement may fall within a monthly exemption, an optional 10% gross-receipts regime, or the ordinary net-income tax regime. Eligibility conditions and annually adjusted thresholds matter.

Israeli real estate: Disposals can be governed by the Land Taxation (Appreciation and Acquisition) Law, 1963, including betterment/appreciation tax and purchaser acquisition tax. These rules are distinct from ordinary securities capital gains taxation.

Israel corporate income tax rate in 2026

The general corporate tax rate is 23%, unchanged from 2018-2019. Israeli-resident companies are generally taxed on worldwide income, while non-resident companies are generally taxed on Israeli-source income and income attributable to an Israeli permanent establishment, subject to treaties.

Special rates or incentives may apply under the Law for the Encouragement of Capital Investments. Closely held companies can be affected by rules on retained profits and attribution of certain income. From 2026, qualifying large multinational groups may also be subject to domestic minimum top-up tax rules; the 23% standard rate should not be treated as a complete statement of every corporate obligation.

Israel value-added tax (VAT) in 2026

The Value Added Tax Law, 1975 generally governs VAT on taxable supplies and imports. The standard rate rose from 17% to 18% on 1 January 2025. Certain exports and other qualifying transactions may be zero-rated; some supplies are exempt. Zero-rating and exemption have different consequences for input VAT recovery.

Historical Israel income tax rates: 2018-2019

For historical reference, the original page covered the following annual earned-income brackets. They must not be used for 2026 calculations.

The standard corporate income tax rate was 23% from 1 January 2018, while the standard VAT rate was 17% in 2018-2019. Tax credit points, exemptions and other thresholds depended on the applicable tax year.

The 2018-2019 article also discussed Israeli-source taxation of non-residents, income tax credits for eligible new immigrants (olim), interest, dividends and capital gains. Those subjects remain relevant, but their treatment must be determined under the rules in force for the specific tax year.

Legislation and official tax resources

For filings, forms, binding instructions and annual tax tables, consult the Israeli authorities. The following links are provided as article references, not website navigation items.

• Israel Tax Authority - official government portal
• National Insurance Institute - social insurance information
• Israeli Ministry of Finance
• Nevo legal database - Israeli statutory texts (Hebrew)

Key provisions: Income Tax Ordinance [New Version], 1961 (including sections 2, 88, 91, 121 and 121B); Value Added Tax Law, 1975; Land Taxation (Appreciation and Acquisition) Law, 1963; and Law for the Encouragement of Capital Investments, 1959. Consult the current consolidated Hebrew text for authoritative wording.

Frequently asked questions