Withholding tax deduction in Israel

Foreign companies operating in Israel usually have common questions about withholding tax deduction. The first step to having a business activity in Israel is to know the Israeli Law and start tax preparation according to him.


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The next article represents the four most popular questions that I have been asked by my German clients regarding to withholding tax(WHT)deduction in Israel.

Is my company obligated to corporation tax in Israel?

In general, if you have a German company with business activity in Israel, is liable to pay corporate tax in Israel, if the company has a permanent establishment under the double tax treaty.

In cases where a global company does not have a permanent establishment; the company is not liable to corporate taxation.

If my company does not have a permanent establishment in Israel, why was WHT paid?

Many German companies contact us, because of a situation where the customer in Israel has made a bank transfer to the company’s bank account abroad. In such scenario, the bank or the customer has deducted withholding tax.

If a withholding tax has been paid, how a German company receive the money back?

Withholding tax is a down payment for final corporate tax on the company’s activities in Israel.

If your company does not have such a permanent establishment as mentioned, your company is not liable to corporation tax at all, and can therefore claim the tax back.

What is the withholding tax rate?

The corporate tax rate in Israel in 2020 is 23%.

In many cases that come to us, we have come across a case where tax retention has been deducted at a rate of 30%, because of the withholding tax law in Israel.


Our tax experts at Allwira& Angel have more than 30 years of experience in such cases. If you have a German company with business activity in Israel, for which withholding tax has been deducted, we have tax solution for you.


Consult with our experts


Read more

Doing business in Israel- six important things you need to know



Yaniv Angel

Managing-Partner, Allwira & Angel

International Taxation expert

[email protected]