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Corporate
Taxation
Taxes on corporate income
Israel-incorporated companies and foreign companies that have a branch presence
in Israel are both subject to Israeli corporate tax. An Israeli-resident entity is subject
to Israeli corporate tax on worldwide income while a non-resident entity is subject to
Israeli corporate tax only on income accrued or derived in Israel. Income sourcing rules
determine when income is to be considered from an Israeli source.
The corporate tax rate is 26.5%. A legislation process is in place which, if approved, will
reduce the tax rate to 25% beginning on January 1, 2016.
A branch is liable for tax at the standard corporate rate on Israel-source income. No
tax is withheld on transfers of profits to the foreign head office unless the branch is
taxed under a reduced tax regime.
Entities that are entitled to incentives under the Law for Encouragement of Capital
Investments (“theEncouragement Law”) are subject to reduced rates of taxdepending
upon the level of foreign ownership and location.
Tax Administration
Taxable period
The tax year is generally the calendar year ended December 31. Certain entities
may apply to have their tax year-end on different dates, specifically, mutual funds,
government companies, quoted companies, and subsidiaries of foreign publicly listed
companies with a different year end.
Tax returns
The Israeli system is based on a combined form of assessment and self-assessment.
The statutory filing date is five months following the end of the tax year, which for a
calendar year taxpayer would be 31 May. It is possible, however, to secure extensions
of the filing date.
Every company regardless of its size must file an annual tax return. The tax return
must be audited by an audit firm and accompanied by an audit opinion and audited
statutory financial statements.
Payment of tax
Generally, 12 monthly advance payments are levied at a fixed ratio of the company’s