Israeli Tax Authority — LLC (Limited Liability Company) taxation in Israel

Source: https://lawoffices.co.il/en/guide-to-taxation-in-israel · 2026

LLCs (חברה בערבון מוגבל / בע“מ) are a favored business structure in Israel due to limited liability protection and operational flexibility. New immigrants establishing a company in Israel must understand the following tax obligations.

Corporate Tax

• LLCs are subject to corporate tax on their taxable income
• Standard corporate tax rate (as of June 2024): 23%
• This applies to profits generated by the LLC, reducing net income available for shareholder distribution

Withholding Tax on Dividends

• When an LLC distributes dividends to shareholders, withholding tax applies
• For Israeli residents: withholding tax on dividends is typically 25% to 33%
• Reduced rates or exemptions may apply under tax treaties between Israel and other countries
• Professional advice is recommended to optimize dividend distribution

VAT (Value Added Tax)

• LLCs engaged in taxable activities must register for VAT
• Standard VAT rate: 17% (scheduled to rise to 18% from 1 January 2025)
• Certain goods and services may qualify for reduced rates or exemptions

Personal Income Tax for Shareholders

• For tax purposes, Israeli LLCs are considered transparent entities
• Profits and losses are attributed to individual shareholders
• Each shareholder must report their share of the LLC’s profits in their personal tax return
• Personal income tax is paid according to individual tax brackets and rates

Capital Gains Tax

• Capital gains arising from the sale of shares in an LLC are subject to capital gains tax
• Specific rates depend on individual circumstances and applicable tax treaties

Summary of LLC Tax Obligations

Note: Tax treaties between Israel and your country of origin may affect your tax obligations. Consulting a qualified Israeli tax attorney or accountant is strongly recommended before establishing an LLC.