The Standard Corporate Tax Rate in Israel

All newly incorporated companies in Israel are taxed at the same corporate income tax rate: 23% . The corporate tax rate for Israeli – state tax will be applied to the total (taxable) profits after deductible expenses of an enterprise and will therefore be imposed on all Israeli companies regardless of their industry. Thus, an Israeli corporation pays 23% on its net income (all of which is subject to taxation) and is similarly taxed on its branch or income in Israel at 23% of only their profits sourced from Israel.

Industry analysts indicate that Israel's corporate tax rate is comparable to those of most of the world's largest economies and that the average statutory corporate tax rate set by the OECD  is very close to these same rates, thereby rating Israel's corporate rate as relatively moderate as well. The Israeli finance ministry has noted that Israel's corporate tax rate has remained the same since 2018 (23%); however, this rate has been reduced from 24% (2017) to 23% and will remain 23% for 2024.

The current rate is 23% on taxable corporate profits and has been effective since 2018.

From 2013 to 2016, the previously established rate was set at 25%, followed by a modified rate of 24% for the 2017 tax year, and the continuing rate remains at 23% for all subsequent years.

How Corporate Tax Applies to New Companies

A newly formed business in Israel will continue to be subject to pay corporate income tax on 23% of its profits each year, using a two-tier tax structure (the corporation also should pay tax on dividends paid to their shareholders); however, the only component that is taxed at the corporate level remains 23%. An Israeli corporation is required to submit an annual tax return within 5 months following their year-end based on the application of the law.

Special Corporate Tax Rates for Certain Qualified Companies

In case you haven’t noticed, while standard corporate rates in Israel are generally set at 23%, several lower rates also exist for some types of firms. For instance, Israel has instituted a lower corporate rate (of between 5% and 16%) for certain kinds of qualifying enterprise that are also able to invest in research and development and export their products. According to the tax authority in Israel, as of 2018, qualified firms that are classified as "preferred" tech firms received an even better corporate tax rate of between 5% and 16% depending on the percentage of their total revenue attributable to export activity and where their firms are located within the country. The incentives provided to these firms by way of a special, reduced tax rate fall under the encouragement/incentives for investment regulatory framework, designed to attract both research and development as well as export activities; however, only firms who satisfy the required criteria and have been approved by the program will be given access to such tax incentives.

For example, domestic firms that do not have a special designation will be unable to obtain a reduced corporate tax rate; the standard corporate rate will apply, which is 23%, unless the firm qualifies under one of the programmes established to allow reduced corporate tax rates or to receive other forms of assistance. In the past two years, existing tax incentive programmes have been replaced with newer programmes designed to attract investment into relatively innovative new business models. For instance, start-up firms that are relatively new may be eligible to receive other forms of assistance such as tax credits, assistance through incubators, or grants from the government, but these different programmes provide a form of assistance for initiate tax credits that are not affected by the standard corporate tax rate from an accounting perspective for UK corporations. In effect, if you own a domestic company that is a start-up and does not have a special designation, your company’s corporate tax will be 23% of your company’s gross profit.

Global Tax Reform and the OECD Minimum Tax

Additionally, the Israeli government is attempting to conform to current global tax reform measures: by 2026, it intends to implement the OECD's 15% global minimum tax for large multinational corporations. This means that Israeli multinational companies that are already paying less than 15% in corporate taxes will be required to increase their tax payments, however, the 23% tax rate will not apply directly to the average company in Israel, but rather, it suggests that multinational companies will be charged at least 15% in taxes overall. At this time, a corporate tax rate lower than 23% is not yet in effect for new companies, though there has been much discussion over the years regarding potential legislation that would lower the corporate tax rate to (for example) 15% in 2022, but none of these proposals have been put into effect.

Summary

The corporate tax rate on corporations based in Israel is 23%, and this tax has been in effect since 2018. The 23% rate applies to all profit earned by ordinary businesses, regardless of the type of business, though many technology and investment incentives exist that can lower the effective tax rate on certain qualified income. New companies should assume that their entire net income tax liability, assuming they have adjusted their net income to reflect their qualifying expenses, is 23%, and as such should explore their most qualified options for R&D or investment tax credits or incentives.

Source: Federal government and major media sources continue to report a 23% rate for all corporate profits earned in Israel.

FAQ

 What is the corporate tax rate in Israel?
The corporate tax rate for businesses operating in Israel is 23% based on net income.

 Has the corporate tax rate in Israel changed recently?
The corporate tax rate has decreased from 24% to 23% since January 1, 2018, and has not changed since that date.

 Are there special tax rates for new start-up type companies?
In most cases, no. Generally, start-up corporations will continue to be subject to the standard corporate tax rate, which is 23% of net profit. However, some start-up businesses may be eligible for special economic development tax incentives under the Israeli tax laws.

 Are all companies taxed at the same rate?
Generally, yes, all domestic companies in Israel will be taxed at 23% of their profit. However, foreign businesses doing business in Israel without a branch in Israel will also have to pay 23% on their Israel source income.

 When can a company expect to see a reduction in the corporate tax rate?

 There are currently no valid proposals to reduce the corporate tax rate under the legislation passed. For 2025, the corporate tax rate in Israel remains unchanged at 23% and although Israel has proposed to have a minimum of 15% effective tax on income derived from multinational corporations by 2026, this will not reduce the standard corporate tax rate.