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Israel - Singapore — Orbitax Withholding Tax Rates

Capital Gains

  • Best Rates0%
  • Domestic Rates 0%
  • Treaty Rates0%
  • EU Rates-

Domestic

Capital gains from the sale of publicly traded shares (acquired after 1 January 2009) in an Israeli company by non-residents are exempt from tax, subject to certain exceptions.

 An exemption from capital gains tax also applies on the sale of shares in an Israeli company purchased on or after 1 January 2009 and not traded on a stock exchange, regardless of the non-resident’s percentage holding in the Israeli company, provided the following conditions are met:

  • The investment is not in a company in which, on the date of its purchase and in the 2 preceding years, the main value of the assets held by the company, directly or indirectly, are sourced from an interest in the following:
    • real estate or a real estate association;
    • the use in real estate or any asset attached to the land;
    • the exploitation of natural resources in Israel; or
    • produce from land in Israel;
  • The capital gains are not derived from the seller’s permanent establishment in Israel; and
  • The shares have not been purchased from a relative or by means of a tax-free reorganization.

 However, the non-resident company is not eligible for the above exemption if an Israeli resident is a controlling shareholder or is entitled to 25% or more of the income or profits of the non-resident company, either directly or indirectly.

 No withholding tax applies on capital gains arising from the disposal of chargeable assets by non-residents. The gains from the disposal of chargeable assets are instead subject to net taxation at the corporate tax rate (currently 23%) in Israel.

Dividend

  • Best Rates5%
  • Domestic Rates 25%
  • Treaty Rates5%
  • EU Rates-

Domestic

Tax is withheld at the rate of 25% on portfolio dividends (less than 10% shareholding) distributed to a non-resident. Where dividends are distributed to a substantial shareholder, i.e., a shareholder holding 10% or more at the time of distribution or within a 12-month period preceding the distribution, the withholding tax rate is increased to 30%.

The dividend withholding tax rate is reduced to 5% with respect to distributions by qualifying Israeli holding companies and to 4%, 5% or 20% with respect to distributions by companies benefitting from an incentive regime (see Sec. 10.1. in Israel Analysis chapter).

Treaty

5%:10%

Interest

  • Best Rates7%
  • Domestic Rates 23%
  • Treaty Rates7%
  • EU Rates-

Domestic

Tax is withheld at the rate of 23% on gross interest paid to non-residents. Interest derived from certain public bonds held by foreign residents is exempt from withholding tax. Interest derived from foreign currency deposits held in an Israeli bank is exempt from tax, subject to certain conditions.

Treaty

7%

Royalty - Copyright

  • Best Rates5%
  • Domestic Rates 23%
  • Treaty Rates5%
  • EU Rates-

Domestic

Tax is withheld at the rate of 23% on gross royalties paid to non-residents.

Treaty

5%

Royalty - Patent

  • Best Rates5%
  • Domestic Rates 23%
  • Treaty Rates5%
  • EU Rates-

Domestic

Tax is withheld at the rate of 23% on gross royalties paid to non-residents.

Treaty

5%

Royalty - Trademark

  • Best Rates5%
  • Domestic Rates 23%
  • Treaty Rates5%
  • EU Rates-

Domestic

Tax is withheld at the rate of 23% on gross royalties paid to non-residents.

Treaty

5%

Sales

  • Best Rates0%
  • Domestic Rates 0%
  • Treaty Rates0%
  • EU Rates-

Domestic

The rate shown is based on physical sales which typically do not attract a withholding tax. Note, however, that more and more countries apply various types of taxes to “digital transactions” and similar. For details of such tax in Israel, see Sec. 12.1. in Israel Analysis chapter.

Service - Management

  • Best Rates0%
  • Domestic Rates 23%
  • Treaty Rates0%
  • EU Rates-

Domestic

Tax is withheld at the rate of 23% on management service fees paid to non-residents, unless a tax treaty either does not permit source-State taxation of service fees, or allows such taxation but at a reduced rate.

Treaty

The treaty does not specifically deal with technical, management and similar service fees. In line with the OECD Model, this means that said services do not fall under the royalty article and do not attract the royalty withholding tax provided for under the treaty unless the services represent a minor part of a commingled transaction imparting in essence know-how. In that case, the services would follow the qualification of the principal component of the transaction, and may then attract the royalty withholding tax under the treaty. Otherwise, said services may be taxed in the source country only if the recipient has therein a (services) PE and the fees are attributable to that PE. Note, however, that not all countries would adhere to the OECD standpoint. ORBITAX has by default opted for the OECD position and the withholding tax rate is by default set to zero where the treaty does not specifically deal with technical, management and similar service fees. Where the relevant country has a developed policy regarding the treatment of technical, management and similar service fees and the correlation between those and royalties, ORBITAX has sought to cover this in Sec. 5.6. of the country chapters (Qualification of Specific Income Categories for Tax Purposes). For a technical analysis of the issue of services Vs. royalties, ##HowToReadTreatyLink##. For a quick reference as to whether any of a selection of some 350 widely-used tax treaties specifically addresses technical service fees, ORBITAX has developed a proprietary Treaty Analysis allowing you to quickly and easily capture the most salient features of the relevant treaty. In order to access the Treaty Analysis of a particular bilateral tax treaty, select the pair of countries under the Treaties Tab.

Service - Technical

  • Best Rates0%
  • Domestic Rates 23%
  • Treaty Rates0%
  • EU Rates-

Domestic

Tax is withheld at the rate of 23% on technical service fees paid to non-residents, unless a tax treaty either does not permit source-State taxation of service fees, or allows such taxation but at a reduced rate.

Treaty

The treaty does not specifically deal with technical, management and similar service fees. In line with the OECD Model, this means that said services do not fall under the royalty article and do not attract the royalty withholding tax provided for under the treaty unless the services represent a minor part of a commingled transaction imparting in essence know-how. In that case, the services would follow the qualification of the principal component of the transaction, and may then attract the royalty withholding tax under the treaty. Otherwise, said services may be taxed in the source country only if the recipient has therein a (services) PE and the fees are attributable to that PE. Note, however, that not all countries would adhere to the OECD standpoint. ORBITAX has by default opted for the OECD position and the withholding tax rate is by default set to zero where the treaty does not specifically deal with technical, management and similar service fees. Where the relevant country has a developed policy regarding the treatment of technical, management and similar service fees and the correlation between those and royalties, ORBITAX has sought to cover this in Sec. 5.6. of the country chapters (Qualification of Specific Income Categories for Tax Purposes). For a technical analysis of the issue of services Vs. royalties, ##HowToReadTreatyLink##. For a quick reference as to whether any of a selection of some 350 widely-used tax treaties specifically addresses technical service fees, ORBITAX has developed a proprietary Treaty Analysis allowing you to quickly and easily capture the most salient features of the relevant treaty. In order to access the Treaty Analysis of a particular bilateral tax treaty, select the pair of countries under the Treaties Tab.