This post provides a focused overview of Israel’s corporate tax regime for 2025, including the flat corporate tax rate and any specific surtaxes that may apply. The information below is intended for business owners and international professionals considering a corporate structure within Israel.
Overview of Corporate Tax in Israel (2025)
For the 2025 tax year, companies operating in Israel are subject to a flat corporate income tax. There is also a relevant surtax on specific accumulated profits under particular circumstances. No progressive tax brackets apply to standard corporate income. All figures are provided in Israeli New Shekel (ILS) and USD, with the exchange rate used being 1 USD = 3.6 ILS for reference.
Main Features of the Corporate Tax Regime
| Tax Type | Assessment Basis | Flat Rate (ILS, %) | Flat Rate (USD, %) | Progressive Brackets |
|---|---|---|---|---|
| Corporate Income Tax | Corporate | 23% | 23% | None |
This flat rate applies consistently to all corporate profits, with no variations by profit level. There is no progressive system in place for corporate taxpayers during 2025.
Surtax on Certain Accumulated Profits
In addition to the standard corporate tax, Israel applies a specific surtax starting from 2025, targeting retained earnings in certain closely held private companies. This measure aims to discourage profit accumulation and encourage the distribution of dividends.
| Surtax Rate (ILS, %) | Surtax Rate (USD, %) | Condition for Application |
|---|---|---|
| 2% | 2% | Applies annually to certain accumulated profits of closely held companies, unless a qualifying dividend is distributed. Implementation began in 2025. |
This 2% surtax is not universal—it applies only to closely held companies as defined by Israeli tax authorities. For such companies, qualifying dividend distributions can avoid this annual accumulated profits surtax.
Key Characteristics and Missing Data
- No minimum or maximum holding periods are specified for these tax rules in the available data.
- Further granularity regarding what qualifies as a closely held company or qualifying dividend should be confirmed via the official Israel Ministry of Finance website or professional local advice.
- There are no official progressive tax brackets for corporate income in 2025, only the flat rate applies.
Pro Tips for Managing Corporate Tax in Israel
- Review your company’s shareholder structure and profit retention policies to determine if the 2% accumulated profits surtax is likely to apply.
- If classified as a closely held company, plan annual dividend distributions strategically to minimize exposure to the surtax.
- Monitor updates and clarifications from the Israeli tax authorities, as definitions and applications of closely held company status can evolve.
- Keep complete and transparent records of dividend declarations and distributions—these are essential for demonstrating compliance during tax assessments.
Where to Find Official Information
For the most authoritative details, consult the Israel Ministry of Finance. Official guidelines and legislative updates are published here.
In summary, Israel’s corporate income tax regime for 2025 remains straightforward with a flat 23% tax rate and no progressive brackets. The unique addition for this year is the 2% surtax on certain accumulated profits for closely held companies unless qualifying dividends are paid. Strategic dividend planning and careful record-keeping are key considerations for compliance and tax efficiency.