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the taxable income allocated to a corporate partner taxed at the regular company
tax rate. Consequently, the actual distribution of partnership income to a partner is a
non-taxable event.
Foreign income
An Israeli-resident company is liable for tax on its worldwide income. Double taxation
is avoided by way of a foreign tax credit mechanism that also applies unilaterally in the
absence of an applicable double taxation treaty (DTT).
Under the controlled foreign company (CFC) regime in Israeli tax law, an Israeli
company or individual may be taxed on a proportion of the undistributed profits of
certain Israeli-controlled non-resident companies in which the Israeli shareholder has
a controlling interest (10% or more of any of the CFC’s ‘means of control’).
Other taxes
Value-added tax (VAT)
As of October 1 2015, the VAT rate is 17%
Exports of goods and certain services and various other transactions are zero-rated,
and certain transactions are exempt. Banks and other financial institutions pay VAT-
equivalent taxes at the rate of based on their total payroll and on profits. Not-for-
profit organizations pay VAT-equivalent tax (wage tax) at the rate of 7.5% of their
total payroll.
Customs duties
Customs duty is imposed on certain products imported into Israel. The rates of duty
depend upon their classification according to the Harmonised Customs Tariff and the
country of origin. Israel has concluded free-trade agreements with the United States,
Canada, Mexico, the European Union (EU), and the European Free Trade Association
(EFTA).
Excise taxes
The government imposes excise taxes on a variety of goods (e.g. fuel, tobacco). The
excise taxes are levied item-by-item.
Municipal tax
Municipal tax is levied annually on buildings by local municipalities based on the size,
location, and purpose of the property.
Transfer tax
The purchaser of real estate is generally subject to acquisition tax at rates up to
a maximum of 10% (the highest rate applies when the purchase price exceeds
approximately 15.5 million Israeli shekels [ILS]).
Stamp taxes
There are no stamp taxes imposed in Israel.