preface

BDO Israel
DOING BUSINESS IN ISRAEL
The tax rate on dividends paid to an individual is 20%, and if
such individual was a significant shareholder (holding 10% and
more of the distributing company) at the time of receiving the
dividend or on any date in the 12 months preceding it - 25%. If
paid to a company domiciled abroad - 20% and if such company
was a significant shareholder on the date of receiving the
dividend or on any date in the 12 months preceding it - 25%.
However, those rates may be reduced according to the relevant
treaty.
Dividends distributed from an Approved Enterprises and /or to
foreign investors may be subject to different tax rates.
8.2.2.7. Adjustments for Inflation
High inflation rates in the early 1980s formed the basis of
enactment of the Income Tax Law (Inflationary Adjustments),
1985. This law regulates calculation of tax according to real
income rather than profit resulting from inflation, as measured
by the Israeli Consumer Price Index (CPI), thus protecting
equity from inflationary erosion.
We must point out that the provisions of the Adjustments Law
were cancelled as from the 2008 Tax Year.
8.2.3. Individuals
8.2.3.1. Definition of an Israeli Resident
Domicile
(a) An individual is deemed to be an Israeli resident if his center
of life is in Israel.
(b) In the framework of determining the “center of life", a
number of auxiliary qualitative criteria were applied, to
demonstrate the family, economic and social relations
representing the individual’s “center of life”. This framework
includes, inter alia, an evaluation of the following:
(1) Location of permanent home (even if he does not reside
therein).
(2) Location of actual home of himself and members of his
family, i.e. actual place of residence.
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