The Israeli tax system is based on a comprehensive withholding regime. This regime requires payors to withhold taxes from payments they make and remit the withheld taxes to the Israeli Tax Authority. The withholding rate depends on the type of payment, and it can range between 15%-50% of the gross payment (without any deductions). To refrain from withholding, the payee can approach the Israeli tax authority, in advance, in order to obtain a confirmation (known as a “withholding certificate”) which reduces or exempt the payment from withholding. If a withholding has already been made, in order to refund it, usually the taxpayer will be required to submit an annual tax return, which is a much longer and more expensive process.
If you are a non-Israeli resident who has sold shares in an Israeli company, you may be required to obtain an Israeli tax withholding certificate in order to release sale proceeds or reduce tax withheld at source. As part of a comprehensive tax withholding system, Israeli law requires the payor to withhold Israeli taxes in certain cases such as share buyback transactions, purchase of private Israeli or Israeli related companies and even in the case of public companies that are traded outside Israel (in which case the withholding will usually apply only if the consideration is higher than a certain threshold of usually US$500,000).
Foreign residents are usually exempt from tax in Israel but they are still required to approach the Israeli Tax Authority to obtain an exemption from withholding. The transaction agreement will usually determine that a dedicated payments agent will hold the consideration for up to half a year in order to allow the sellers to obtain the certificate. This procedure is necessary for the Israeli Tax Authority to ensure that the seller is not an Israeli resident.
Our firm provides professional assistance in securing withholding tax certificates from the Israel Tax Authority for foreign sellers of Israeli securities.
We advise private investors, shareholders, founders, trusts and foreign corporations in connection with applications for exemption from withholding and a claim for a refund when a withholding was already made.
For professional, responsive, and experienced assistance in obtaining your Israeli withholding certificate - contact us to discuss your transaction at:
Tel: +972-74-7057725
Email: katzg@herzoglaw.co.il
