Israel

Israeli residence turns on where an individual's 'centre of life' is located, a facts-and-circumstances test. Presence in Israel of 183 days or more in a tax year, or of 30 days or more in the year together with 425 days or more over that year and the two preceding years, creates a rebuttable presumption of Israeli residence.

Israeli tax returns are filed on a calendar-year basis, due by 30 April subject to extension. A resident taxpayer is not required to file at all where tax has already been withheld at source from wages and other listed income, unless one of several exceptions applies, such as wages or other income exceeding set thresholds, or liability for the 3% surtax.

Non-residents are taxed on Israeli-source income at the same rates as residents, and on capital gains from Israeli-situated assets, subject to special exemptions available to non-residents on certain gains.

Employees are entitled to relatively few deductions, mainly subsistence expenses for travel away from home under detailed rules, plus contributions to an approved provident fund and training fund up to set limits. Mortgage interest and medical expenses are not deductible, and charitable contributions give rise to a tax credit rather than a deduction.

New immigrants and returning residents who were foreign resident for at least ten years get a ten-year exemption from Israeli tax on foreign-sourced passive income such as dividends, interest, rent, royalties, and pensions, and from capital gains tax on assets located outside Israel.

Under the Value Added Tax Law, a dealer whose annual turnover across all of their businesses does not exceed ILS 122,833 — a ceiling indexed to the Consumer Price Index every 1 January — is classified as an exempt dealer (osek patur) rather than a licensed dealer (osek murshe). An exempt dealer's transactions are exempt from VAT, except for real-estate sales and sales of equipment on which input tax was previously deducted at purchase.

Zero-rated transactions center on exports of goods, sales of intangible assets to non-residents, and services supplied to inbound tourists, including hotel accommodation, car rental and touring services, and international conference services. Separately, the law exempts residential leasing for periods not exceeding 25 years and specified real-estate transfers from VAT, alongside the transactions of exempt dealers themselves.

Individual capital gains on securities are split into a real gain and an inflationary component, the latter calculated by applying the increase in the Israeli consumer price index to the asset's cost from the date of acquisition to the date of sale. The inflationary component is exempt from tax to the extent it accrued after 1 January 1994, and is generally taxed at 10% for the portion that accrued before that date.