preface

BDO Israel
DOING BUSINESS IN ISRAEL
estate association located in Israel, for purposes of the part of
the consideration derived from Israel.
(c) The asset is a share or right to a share in a corporate entity
domiciled in Israel.
(d) The asset constitutes a right in a foreign-domiciled corporate
entity which, in principle, is the holder of a right, directly or
indirectly, to an asset located in Israel, for the part of the
consideration derived from the asset located in Israel.
8.3.2. Taxable Capital Gains
For tax purposes, capital gains include two components:
♦ Inflationary gain - the part of the gain derived from linkage to the
CPI.
The inflationary gain has been exempt from tax since January 1,
1994 and is liable to 10% tax on the accrued portion prior to that
date.
♦ Real gain - the difference between the total capital gain and the
inflationary gain.
As a rule, the tax rate capital gains accrued by an individual shall not
exceed 20%.
Disposal of an asset purchased prior to January 1, 2003, is
implemented on a linear basis. Capital gains accrued until January 1,
2003 are liable to tax at the previous tax rates.
The corporate capital gains tax constitutes the company's tax rate
(24% in 2011).
For a linear example of calculating the capital gains tax - see Appendix
1.
8.3.3. Profits for Distribution
On the sale of shares, including in the framework of liquidating a
company, a tax benefit is granted on gains liable to tax on the corporate
level, i.e. profits available for distribution. The part of the gain in the
amount of the said profits accrued up to December 31, 2002 is liable to
a 10% tax rate. Profits available for distribution after December 31,
2002 will be equal to the tax rate imposed on dividends, i.e. 20%/25%
for individuals and 0% for companies.
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