Double Taxation in Israel

Double taxation in Israel

Processes of globalization and the development of international markets have brought individuals and companies to deal with the issue of double taxation. Double taxation occurs when an individual or a company is liable for paying taxes twice on the same source of income. Double taxation can occur in many situations, mainly when there is a conflict of source rules between countries, for instance when the country an individual is working in collects taxes on a territorial basis, while his or her home country collects taxes based on a personal level. This is a classic case of double taxation.

Double taxation treaties

Double taxation treaties are designed in order to help avoid these kinds of situations. Most double taxation treaties are based on an international model which has been designed by the OECD. Double taxation treaties are agreements between governments for sharing tax collection rights. The basic concept which stands behind these treaties is to enable companies and individuals to offset tax liabilities in one country by paying the same kind of taxes in another country, and so preventing situations of paying double taxes on income from the same source. These kinds of treaties provide solutions for individuals or corporations who base their operations in two countries simultaneously.  Double taxation treaties generally not only include solutions for double taxation. These treaties usually include tax reductions or exemptions for many transactions between residents of countries which are signatory of double taxation treaties.     

Israeli double taxation treaties

Israel is a signatory on treaties for preventing double taxation with more than forty countries from all over the world. In many cases, the treaties exempt Israelis from paying double income tax and only require paying the margin between the amount of income tax paid abroad and the tax liability at the rate required by the Israeli tax laws.  Over the years, Israeli governments have set goals of encouraging foreign investments in Israel. In order to encourage foreign investments in Israel, Israeli governments have adopted many tax exemptions and reductions through the framework of double taxation treaties.

Effective taxation planning

In order to take full advantage of the many double taxation prevention treaties which Israel has signed, it is not enough to be acquainted with the treaties alone. It is highly important to have a close acquaintance with the Israeli taxation laws, as well as with taxation laws in any other country you are intending to have transactions with. In order to succeed in lowering your total tax liability we recommend hiring an accounting firm which specializes in Israeli and international taxation rules and regulations. An accounting firm which specializes in international operation will be able to help you in planing your transaction in a way that you will be liable for the minimum tax rate as possible and save considerable amounts of money. 

Double taxation treaties are one of the tools countries of the world use in order to allow and encourage international trade. In these troubled times, many investors are seeking new and promising investment opportunities. Double tax prevention treaties are one of the many factors which make Israel an attractive venue for international investments.

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