Non-residents are subject to income tax on income from Israeli sources and the capital gains tax on capital gains on assets located in Israel (subject to special exemptions for non-residents). The procurement rules determine when revenue comes from an Israeli source. For Israeli tax purposes, an Israeli resident is defined as an individual whose center of life is in Israel, considering the person's family, economic and social ties.
Dividends are usually taxed at a rate of 25 %or 30% if a shareholder owns 10% or more ofthe company. In the case of a double taxation treaty, this can result in alower tax rate for a foreign resident.
When a substantial shareholder (10% or more) withdraws or utilizes company assets, the shareholder will pay taxes on them as dividends or renumeration (if the company has no net profit and the shareholder and the company are in anemployment relationship). These rules also apply if the party exercising them is related to a shareholder who owns 10% or more of the company's shares under the Income Tax Ordinance.
Non-resident sare exempt from capital gains tax in the following circumstances: