IRS / Israel Tax Authority — US-Israel Treaty Withholding Tax Rates on Dividends, Interest, and Royalties
Source: https://www.taxesforexpats.com/country-guides/israel/us-israel-tax-treaty.html · 2026
The US–Israel tax treaty sets maximum withholding tax rates on dividends, interest, and royalties flowing between the two countries. These rates reduce the standard 30% US withholding rate for qualifying Israeli residents, and apply symmetrically for US residents receiving Israeli-source income.
Withholding Rate Table
| Income Type | US-source → Israeli Resident | Israeli-source → US Resident | Treaty Article |
|---|---|---|---|
| Dividends (general) | 25% | 25% | Article 12 |
| Dividends (qualifying corporate direct dividend) | 12.5% | 12.5% | Article 12 |
| Interest (general) | 17.5% | 17.5% | Article 13 |
| Interest (financial institutions) | 10% | 10% | Article 13 |
| Interest (government-guaranteed debt) | 0% | 0% | Article 13 |
| Industrial royalties | 15% | 15% | Article 14 |
| Copyright or film royalties | 10% | 10% | Article 14 |
Source: IRS treaty text, IRS Technical Explanation, and IRS Tax Treaty Table 1
Who These Rates Apply To
These treaty withholding rates are most useful for:
- Israeli residents who are not US citizens
- Noncitizen US residents receiving Israeli-source income
US citizens living in Israel generally cannot use these treaty rates to reduce US tax because of the savings clause in Article 6, paragraph 3. The Foreign Tax Credit (Form 1116) is the primary double-taxation relief mechanism for US citizens.
Social Security — Special Rule (Article 21)
US Social Security payments are exempt from tax in both the US and Israel under Article 21. This benefit survives the savings clause and applies to US citizens living in Israel.
IRS References
- Full treaty text: https://www.irs.gov/pub/irs-trty/israel.pdf
- Technical explanation: https://www.irs.gov/pub/irs-trty/israeltech.pdf
- Treaty documents page: https://www.irs.gov/businesses/international-businesses/israel-tax-treaty-documents
- IRS treaty table: https://www.irs.gov/businesses/international-businesses/united-states-income-tax-treaties-a-to-z