Tax rates in Israel

What is the tax rate in Israel for self-employed workers?

The tax rate in Israel is determined by the progressive tax method on revenues.

In this article, we'll look at personal income tax, the equivalent of the French IR. (income tax).

Progressive taxation means that the higher an individual's gross taxable income, the higher the tax rate in Israel.

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Understanding the tax rate in Israel.

•  Taxable income (i.e. a person's income after deductions, offsets and exemptions) is divided into "tax brackets", and each tax bracket has a different tax rate. These brackets represent the tax brackets in Israel.
• The idea behind the bracket method is that the higher the individual's income, the higher the amount of taxation.

2023
2022
2021
2020
2023

Annual income  (in shekels)	Tax rates	Tax levels	Accumulated taxes
0 - 81,480	10%	8,148	8,148
81,481 - 116,760	14%	4,939	13,087
116,761 - 187,440	20%	14,136	27,223
187,441 - 260,520	31%	22,654	49,877
260,521 - 542,160	35%	98,573	148,450
542,161 - 698,280	47%	73,375	221,825
698,281 and over	50%

* Passive income (rent, interest, dividends, capital gains, etc.) from an individual under 60 is not eligible for the tax rate in Israel of less than 31%.

2022

Annual income  (in shekels)	Tax rates	Tax levels	Accumulated taxes
0 - 77,400	10%	7,740	7,740
77,401 - 110,880	14%	4,687	12,427
110,881 - 178,080	20%	13,440	25,867
178,081 - 247,440	31%	21,501	47,368
247,441 - 514,920	35%	93,618	140,986
514,921 - 663,240	47%	69,711	210,697
663,241 and more	50%

* Passive income (rent, interest, dividends, capital gains, etc.) from an individual under 60 is not eligible for the tax rate in Israel of less than 31%.

2021

Annual income  (in shekels)	Tax rates	Tax levels	Accumulated taxes
0 - 75,480	10%	7,548	7,548
75,481 - 108,360	14%	4,603	12,151
108,361 - 173,880	20%	13,104	25,255
173,881 - 241,680	31%	21,018	46,273
241,681 - 502,920	35%	91,434	137,706
502,921 - 647,640	47%	68,018	205,724
647,641 and over	50%

* Passive income (rent, interest, dividends, capital gains, etc.) from an individual under 60 is not eligible for the tax rate in Israel of less than 31%.

2020

Annual income  (in Shekels)	Rates  taxation	Tax levels	Accumulated taxes
0 - 75,960	10%	7,596	7,596
75,961 - 108,960	14%	4,620	12,216
108,961 - 174,960	20%	13,200	25,416
174,961 - 243,120	31%	21,129	46,545
243,121 - 505,920	35%	91,980	138,525
505,921 - 651,600	47%	68,469	206,994
651,601 +	50%

* Passive income (rent, interest, dividends, capital gains, etc.) for an individual under 60 is not eligible for the tax rate in Israel of less than 31%...

Distinction between active and passive income

• There is a distinction between the income generated by the personal work of the individual and income created by another source that is not the individual's own work (e.g. rental income, interest or dividends). As a result, tax rates in Israel differ between these two "natures" of income:
• Active" income, derived from the taxpayer's direct work. This is generally income from salaries or self-employment (Ossek mourche or Ossek patour).
• Passive" income, requiring no direct involvement on the part of the taxpayer.
  
  

Tax rates in Israel is updated every year.

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So, what does this mean in figures?

• Let's take David as an example. David has a taxable income from his Ossek Mourché business of 220,000 Nis in 2022.

Let's calculate your tax rate in Israel.

On the first tranche: 77,400 ₪ he will pay at 10%: 77,400 * 10% = 7,740 ₪.

2nd bracket - 77,401 ₪ to 110,880₪ he will pay 14%: 33,480 * 14% = 4,687 ₪
3rd tranche - 110,880 ₪ to 178,080 ₪ he will pay 20%: 67,200 * 20% = 13,440 ₪
4th bracket - 178,080 ₪ to 220,000₪ he will pay 31%: 41,920 * 31% = 12,995 ₪

Total taxes: 38,862 ₪

So David will pay a total of 38,862 ₪ in taxes, on a taxable income of 220,000₪.

This amounts to an average tax rate in Israel of 17.65% on his taxable income.

But that's not all...

In reality, David will pay less income tax once his tax credits have been applied.

Individuals are entitled to an annual tax deduction based on their personal situation. For more information, please visit next link.

You must also contribute to the bituah leumi.

However, it's important to remember that in addition to income tax calculated using the tax rate in Israel, a self-employed worker in Israel must also contribute to Bitouah Leumi (National Insurance) and a pension fund.ֿ

Are there any exceptions to the tax rate system in Israel?

Yes, of course. There are many types of income that have special tax rates - lower than the rates specified in this article.

Please consult us if you have any questions about specific aspects.

Active and passive income

Active income is work in which you are actively involved. For example, working as an employee or running a business. Passive income is income from assets you own, e.g. rental income, dividends, etc.

People under 60 cannot use the lower tax brackets (under 31 %) for passive income.

Income taxed at lower rates

There are many types of income that have special tax rates - lower than the rates specified in the tax bracket system.

For example, tax on dividends can reach a maximum of 25 % or 30 %.

1. Rental income (Israeli residential) - 10% (conditions apply)
2. Rental income (non-Israeli) - 15% (conditions apply)
3. Interest - generally 25%
4. Dividends - 25% (30% for a majority shareholder).
5. Capital gains - generally 25%
6. Lottery winnings - 25%.

Special tax rates for rental income depend on the location and classification of the property.

We've written an article that explains in detail.See also: How to calculate tax on property income in Israel

Dray & Dray - accounting services

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