Israel (IL)

Start-Up Nation with world-class tech ecosystem, rich ancient history, stunning Mediterranean beaches, and a vibrant expat and immigrant community.

Capital: Jerusalem

Region: Middle East

Language: Hebrew

Currency: ILS (₪)

Cost of living: Expensive (index 72)

Emergency: 100

Tax & Payslip Guide

Understanding your taxes in Israel — tax year January 1 – December 31.

📅

Tax Year

January 1 – December 31

⏰

Filing Deadline

April 30 each year for the previous calendar year. Most employees (Sachar Avoda) do not need to file — their employer submits the annual Form 101 (Tofes 101) and Mas Besoch (tax at source / withholding). Self-employed and those with multiple income sources must file independently.

🧾

VAT (Standard)

18%

📊 Income Tax Brackets

Income from	Income to	Rate	Notes
0	84,120	10%	Annual income up to NIS 84,120 (monthly ~NIS 7,010). 2026 thresholds indexed from prior year.
84,121	120,720	14%	Annual income NIS 84,121–120,720 (monthly NIS 7,011–10,060).
120,721	228,000	20%	Annual income NIS 120,721–228,000 (monthly NIS 10,061–19,000).
228,001	301,200	31%	Annual income NIS 228,001–301,200 (monthly NIS 19,001–25,100).
301,201	560,280	35%	Annual income NIS 301,201–560,280 (monthly NIS 25,101–46,690).
560,281	721,560	47%	Annual income NIS 560,281–721,560 (monthly NIS 46,691–60,130).
721,561	∞	50%	Annual income above NIS 721,561 (monthly above NIS 60,131). The 50% effective rate comprises 47% standard rate + 3% surtax (Yasak Mas) on income above NIS 721,560/year.

🏛️ Social Contributions

National Insurance (Bituah Leumi) — Employee

Employee: 0.4% on income up to NIS 7,522/month; 7% on income above NIS 7,522/month

Employer: 3.45% up to ceiling; 7.5% above ceiling

Funds old-age pension, disability, unemployment, work injuries, and maternity benefits. Administered by the National Insurance Institute (Bituah Leumi — ביטוח לאומי) at btl.gov.il.

Health Insurance (Bituah Briut) — Employee

Employee: 3.1% on income up to NIS 7,522/month; 5% on income above NIS 7,522/month

Employer: Employer does not pay separate health insurance contribution

Bundled with National Insurance contributions. Entitles employees and their families to coverage under one of the 4 HMOs (Kupot Cholim). Deducted automatically from salary.

Mandatory Pension (Kranot Pensiya)

Employee: 6% of gross salary

Employer: 6.5% + 8.33% severance component

Mandatory occupational pension savings. Employee contributes 6%, employer contributes 6.5% to pension fund plus 8.33% to severance fund (can substitute legal severance). Total accumulated: 20.83% of salary per month.

🛒 VAT Rates

18%

Standard

VAT raised from 17% to 18% on 1 January 2025, maintained at 18% for 2026 (proposed rise to 19% was averted in the 2026 budget). 0% on exported goods and some agricultural products. Eilat is a free-trade zone with different VAT rules. VAT is called Mam (מע"מ — Mas Erech Musaf) in Hebrew.

🧾 Sample Payslip Decoder

Gross Salary NIS 25,000/month (software developer, mid-senior level)

Gross salary (Shakhir Bruto) + NIS 25,000

Income tax (Mas Hachnasa) — blended 10–31% after credit points - -NIS 4,850

National Insurance employee (Bituah Leumi) - -NIS 1,950

Health Insurance employee (Bituah Briut) - -NIS 950

Pension employee contribution 6% (Kranot Pensiya) - -NIS 1,500

Net Salary (Take-home) NIS 15,750/month

Illustrative for 2026. Gross NIS 25,000. Income tax at blended rate after standard 2.25 credit points (Nekudot Zikui, worth ≈NIS 556/month tax saving); effective rate ≈19.4%. National Insurance employee share at 3.5–12% depending on income bracket. Health insurance employee contribution at standard rate. Pension: 6% employee mandatory contribution into a Keren Pensiya — employee owns these funds. Employer adds 14.83% of gross (6% pension + 8.33% severance/pitzuim) plus employer National Insurance ≈7.5% on top of gross — total employer cost approximately NIS 30,500/month. Olim Hadashim (new immigrants) within their 10-year tax break period may pay significantly less income tax.

🌍 Special Expat Tax Rules

Oleh Tax Exemption: New immigrants (Olim) are exempt from Israeli income tax on foreign-sourced income for 10 years from their Aliyah date. This is one of the most generous expat tax incentives in the world. New Olim also receive additional tax credit points (Nekudot Zikui) — 3 additional points in year 1, reducing to 1.5 by year 3. Each tax credit point is worth NIS 2,964/year (NIS 247/month). Expert professionals and returning residents (Toshav Chozer) also have partial exemptions.

📋 Double Tax Treaties

Israel has double tax treaties with 59+ countries including the USA, UK, Germany, France, Canada, Australia, Russia, China, and most EU countries. Prevents double taxation of income from cross-border activities. FATCA (US): Israel is a partner jurisdiction — Israeli banks report US person account information to the IRS.

Israel Tax Authority (Rashut HaMisim — רשות המסים)

https://www.taxes.gov.il

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