Taxation in Israel

Summary: Overview of Taxation in Israel, which includes personal taxes, corporate taxes, dual taxation issues, social security and medical insurance.

Israel's tax is imposed on a personal basis, in place of the previous territorial basis. All sources of income are taxed in Israel. In 2010 Israel's corporate income tax rate is 25% and the individual income tax rates are 10%-45%. There are reduced tax rates for passive income. Israel tax withholding for non-residents are: Dividends- 20-25%, Royalties- 25%, Interest- 15, 20, 25%.

Dual Citizen Taxation:

A contract exists between Israel and the USA concerning taxation of residents with dual citizenship. If an employee has dual citizenship and is earning money in Israel, tax obligations are obliged to the authorities of Israel. These obligations are based on one's individual status in Israel and America (additional taxes once returned in the states, working in America, investments, income). However, one will not pay double taxes on the same income. An employee won't be taxed in America for income made in Israel.

Social Security and Medical Insurance:

Each employee must pay social security and health insurance by deducting from one's salary based on individual income. Both employee and employer are required to pay social security. The top rate for social security payments are: Employer- 5.43% and Employee- 12% and are subject to a monthly ceiling of 76,830NIS.

A non-resident employee in Israel must issue private health insurance for the entire length of stay. Non-residents are entitled to a limited service from the social security benefits. The social security rate that will be deducted monthly will be a minimal applicable fee.

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