Import Procedures

The Israel Customs Administration employees are in charge of enforcing the terms of legality of import and export, preventing illegal activity (frauds, narcotics, money laundering and intellectual property violations), and supervising all import to and export from Israel, as well as commercial import to the Palestinian Authority.

The following documents are required to import goods into Israel: invoice, packing list, delivery order (a document noting the freight’s physical location at the port of import), import declaration, importer's custom declaration (a form that needs to be completed by the importer and is meant for indicating the relations between the importer and the supplier for the purpose of calculating the total value of the deal concluded between them including all auxiliary costs), certificate of origin, freight bills (according to the means of transport), import permit issued by the Ministry of Economy and Industry, certificate of the Standards Institution of Israel stating that the product complies with Israeli standards.

Information on detailed customs clearance procedure is available on the website of the Israel Customs Administration.

Specific Import Procedures

There are special certificates for certain imported products on demand from the competent authority (Health Ministry, Transport Ministry, etc.).
The Kosher certificate is needed for food products such as beef, poultry, and other meat and products. However, in an effort to encourage food imports and lower prices on Israeli supermarket shelves, the Chief Rabbinate has decided to exempt importers from presenting a certificate of supervision from a recognized local kashrut agency as a condition for receiving a kosher stamp in the country.

Distribution channels

Consumer spending has been driving Israeli economic growth in recent years, but retailers in the country do not appear to have been the beneficiaries of booming private consumption. Due to the Covid-19 pandemic, private expenditure decreased by 9.2% in
2020 (CBS). According to the latest data available from the US Trade Department, the fast-moving consumer goods (FMCG) segment sales reached USD 15.08 billion in 2020, of which USD 12.41 billion were from food products. The Central Bureau of Statistics estimated that in 2020 expenditure for food, beverages and tobacco accounted for 20.8% of consumption expenditure. The retail food market faces slow growth, limited competition, and high prices. Changes have been noted in the shoppers’ basket: facing high food costs (19% higher than the OECD average), Israeli consumers are opting for more affordable products, with an increase in the sales of private label products. In addition, the introduction of the " Food Law ", Law for Enhancement of Competition in the Food Sector, is a major government regulation which imposes various restrictions on retailers in term of pricing, number of outlets in the same area, etc.

Although small grocery stores are the most important retail channel in the country in terms of numbers of stores, they struggle to compete with the supermarkets, due to more competitive prices and longer operating hours. There are three main retail food sub-sectors in Israel: supermarkets located on the outskirts of the main cities (however, supermarkets chains are increasing their activity and presence in the centre of cities and online), traditional markets with a limited range of products located in the neighbourhood and convenience stores located on the high streets or gas stations.

Distribution market players

Foodstuffs are distributed through supermarkets, traditional markets, convenience stores and open air markets. Sales in supermarket chains account for over 65% of total retail food market sales. The top ten chains have over 700 outlets. The three leading supermarket retailers are Shufersal, Rami and Levi Merav-Mazon Kol/Osher Add, which have more than half of the market share (USDA, 2021). Israel’s largest retail producer and seller of non-kosher products is Tiv Ta’am. Over the last decade discounters have seen considerable growth
Convenience stores count around 900 outlets, while small independent neighbourhood grocery stores dominate the market in terms of number of outlets with approximately 5,000 outlets (although the number is declining).

Retail Sector Organisations

Federation of Israeli Chamber of Commerce
Ministry of Economy and Industry

Consumption Taxes

Nature of the Tax

VAT - (MA'AM in Hebrew)

Tax Rate

17% (the VAT rate is set to increase to 18% starting from January 1, 2025).

Reduced Tax Rate

Certain items are zero-rated, including exports of goods; supplies of intangibles to foreign residents; supplies of services to foreign residents, subject to broad use and enjoyment restrictions; hotel accommodation for tourists; leasing private cars to tourists;  tourist transportation; supply of monitor services, as well as inspection and coordination services, with regard to clinical trials conducted in Israel.
Not-for-profit organisations pay VAT-equivalent tax (payroll tax) at the rate of 7.5% of their total payroll. The rate is 17% for financial institutions (set to increase to 18% in 2025).

Other Consumption Taxes

Purchase tax on the purchase of real estate (0-10% for the first residential property owned in Israel; 8-10% if real estate is an additional residential home or 0.5-5% for Jewish making their "Aliyah"), municipal tax, land betterment tax (varies depending on purchase date).
Certain goods are subject to excise taxes (including gasoline and diesel fuel used for transportation, tobacco, and alcohol) at different rates.
Not-for-profit organisations pay VAT-equivalent tax (payroll tax) at the rate of 7.5% of their total payroll. The rate is 17% for financial institutions.
A luxury tax is levied on the purchase of certain yachts and luxury cars.
There are no stamp duties in Israel, nor net wealth tax or net worth tax.

Corporate Taxes

Company Tax

23%

Tax Rate For Foreign Companies

Companies incorporated in Israel or managed and controlled in the country (determined on a case-by-case basis) are deemed to be resident in Israel.
A foreign corporation managed and controlled by a new Israeli resident or a senior returning resident (an individual who has spent at least 10 years abroad) is typically not classified as an Israeli resident company for 10 years from the individual's arrival in Israel. However, the Israeli Tax Authority (ITA) may still assert that the individual creates a permanent establishment (PE) of the foreign corporation in Israel.

Capital Gains Taxation

The capital gains tax rate varies based on the asset's purchase date and nature. For corporations, the standard rate is 23%. Profits accrued from January 1, 1994, have an exemption on the inflationary component; a 10% tax applies to profits accrued before this date.
On share sales, undistributed company profits during the seller's ownership period, subject to company-level tax, may be tax-exempt in certain cases.
Israeli resident entities face capital gains tax on asset disposal, irrespective of asset location. Israeli-source income includes gains from tangible and intangible assets in Israel or holding interests in Israeli assets. Shares of Israeli companies or foreign ones with main assets in Israel may also be treated as Israeli assets.
Non-Israeli tax residents are exempt from Israeli capital gains tax on Tel Aviv stock exchange share sales unless linked to an Israeli permanent establishment (PE).
Nonresidents enjoy a broad exemption from capital gains tax on securities in Israeli or related companies acquired after January 1, 2009, except for certain cases like shares primarily consisting of Israeli real estate assets or held through a PE.
Preferred technological enterprises selling qualifying intangible assets to related nonresidents may be taxed at 12% or 6% rates, subject to conditions.

Main Allowable Deductions and Tax Credits

Expenses incurred wholly and exclusively in the production of income are generally tax-deductible.
Generally, pension fund contributions made to recognised funds are deductible for the employer, provided they are not above a certain level and are made regularly. Interest expenses incurred in the production of taxable income are normally deductible. Provisions for bad debts are deductible in the year in which it is evident that the debt has become irrecoverable. Research and development (R&D) costs are typically deductible for tax purposes, even if they are considered capital costs.
Goodwill purchased may be amortisable over a ten-year period (10% per year). Donations of at least ILS 207 (for 2024) to approved state or charitable institutions within a tax year are eligible for a tax credit. The amount of the credit is calculated by multiplying the contribution amount by the corporate tax rate applicable during that year. However, the credit amount cannot exceed the lower of two options: (i) 30% of the corporation's taxable income for the year, or (ii) ILS 10,354,816 (in 2024). Any unused tax credits can be carried forward for up to three years, subject to specific regulations.

Business losses can offset income from any source within the same tax year. However, loss carrybacks aren't permitted. These losses can be carried forward indefinitely and used to offset income from the same trade or business or capital gains within the business, but not against income from other sources.
Payments of interest, royalties, and management fees to foreign affiliates are deductible (conditions apply).

Tax and cash incentives are provided for companies that qualify for the "Preferred Enterprise (PFE) regime", generally those who contribute to the development of the productive capacity of the economy, absorption of immigrants, creation of employment opportunities, or improvement in the balance of payments. The "Special Preferred Enterprise (SPFE) regime" applies to certain large corporations that can demonstrate their great contribution to the Israeli economy. Another regime is that of "Preferred Technology Enterprise", for companies engaged in the technology sector and that are part of a group of companies with aggregate annual revenues less than ILS 10 billion, among other conditions.

Other Corporate Taxes

Municipalities levy an annual tax on buildings, based on the size, location, and purpose of the property. Property taxes are generally imposed at the municipality level on the occupier of commercial and residential real property. Unoccupied property is generally taxed on the property's owner.
Capital gains on real estate are subject to the land appreciation tax law. The tax rate on the real gain is the applicable corporate tax rate (23% in 2024).

All property purchase is subject to tax, at rates varying between 0% and 10% depending on the status of the buyer (Israeli citizen, foreign resident in the process of obtaining Israeli citizenship, foreign citizens making Aliyah), the number of properties held (one or multiple) and the value of the real estate. The highest rate applies when the purchase price exceeds ILS 20,183,565.

Social security contributions paid by the employer for Israeli-resident employees are 3.55%, up to a monthly income of ILS 7,522 and 7.6% on the difference between ILS 7,522 and the maximum monthly income of ILS 49,030. For non-resident employees, lower rates apply: 0.59% up to a monthly income of ILS 7,522 and 2.65% on the difference between ILS 7,522 and the maximum monthly income of ILS 49,030.

Non-profit organizations are subject to a tax of 7.5% of payroll in lieu of VAT. A similar tax is levied on financial institutions, at a rate of 17% (scheduled to be increased to 18% effective January 1, 2025).

Other Domestic Resources

Israel Tax Authority

Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed

Israeli Tax Treaties

Withholding Taxes

Dividends: Dividends paid by an Israeli resident company to another resident company from income sourced in Israel and subject to corporate taxation are not subject to withholding tax. However, dividends to Israeli resident individuals are generally taxed at a 25% withholding rate, rising to 30% if the individual controlled at least 10% of the payer company in the past year. Exemption or reduced withholding certificates can be issued by the ITA for resident companies and individuals. Dividends to non-controlling foreign entities face a 25% withholding tax, while it's 30% otherwise, with possible reductions under tax treaties or incentive schemes. Preferred enterprises distributing dividends to residents or non-residents are taxed at 20%, potentially reduced under treaties. Dividends from technological enterprises to individuals are taxed at 20%, with possible treaty reductions, while those to companies face a 4% rate, further reducible under treaties. Dividends from accumulated income since August 15, 2021, are taxed at a 15% rate for residents or non-residents, with potential treaty reductions.

Interest: Corporate income tax, currently at 23%, is withheld from interest payments to both resident and nonresident "bodies of persons." The rate for nonresident interest may be lowered under a relevant tax treaty. For resident individuals, withholding tax rates vary: 20% on interest from provident funds (15% if derived from pre-8 May 2000 deposits), 25% on bank interest (15% if not index-linked), 35% on debentures or pre-8 May 2000 government bonds held by recipients with less than 10% shares in the payer, and 47% if the recipient has at least 10% control over the payer, is its employee, or provides services or products to it. Other individual interest is subject to a 25% withholding tax (15% if not index-linked). The ITA can issue exemption or reduced withholding certificates for interest paid to resident entities and individuals. Nonresident individual interest is taxed at 25% but can be reduced under a tax treaty, while certain public bond interest paid to nonresidents may be exempt from withholding tax.

Royalties: payments made to resident entities and individuals are subject to withholding tax at 20% where the recipient can demonstrate that it maintains books of account and has filed the necessary returns; otherwise, the rate is 30%. The ITA may issue an exemption certificate or a reduced withholding certificate allowing royalties to be paid to resident companies and individuals without the deduction of withholding tax or subject to a reduced withholding tax rate. Royalty payments to nonresident entities and individuals are subject to withholding tax at 23% and 25%, respectively. The rate may be reduced under an applicable tax treaty.