The Israeli tax year ends soon, on December 31. There may be many things to consider, including those briefly outlined here.
The big picture: The Israel-Hamas War has added to the government’s budgetary needs. So, taxes won’t be cut any time soon.
War assistance: Time is running out to claim October 7 massacre and war compensation for property damage and losses for businesses near the northern and southern borders. IDF reservists should continue receiving compensation for loss of salary, or freelancer compensation, according to a formula.
On the tax side, if business assets took a hit, or were sold and are replaced this year, any loss may be deducted this year as an ordinary expense (see Income Tax Ordinance Sec. 27).
Private companies in Israel or abroad: The tax on “trapped” undistributed profits introduced at the beginning of 2025 needs urgent year-end review.
There are three main tax types: (1) Up to 50% tax on 2025 profits attributed to shareholders of most private non-industrial non-tech companies, “closely held” companies with five or fewer shareholders; (2) Additional 2% tax on pre-2025 accumulated profits not from industry or tech of private closely held Israeli resident companies. Alternatively, up to 35% tax may be paid on dividends of 5%-6% of accumulated profits; (3) Option to liquidate closely held companies and/or distribute assets, pay dividend tax of up to 35% but defer capital-gains tax and perhaps enjoy lower personal tax rates on future income from those assets. Detailed rules and looming deadlines apply.
Tax type (1) is especially challenging, regarding profits of foreign companies held by Israeli resident shareholders, even for olim (new immigrants) in their 10-year tax holiday. Less obvious solutions exist, which are best implemented this year.
Business – general: Businesses should consider, among other things, paying dividends; adjusting monthly income-tax installments (mikdamot); income and income timing; expenses and expense timing; inventory (stock) count on December 31; and other accruals or provisions. Is long-term project planning possible? Charitable donations? New industrial equipment may enable accelerated depreciation.
International intercompany transactions between related (50% or more) parties must be on arm’s-length terms. Annual transfer-pricing studies are necessary and helpful.
E-commerce businesses may face income tax and VAT/GST/sales taxes in the US, EU, UK, and elsewhere, even if they have no physical presence in those countries. Amending the business model may be worth considering.
Are your pension, study funds (hishtalmut), and life insurance enough? Freelancers and 0%-or-more shareholders of private companies should consider pension funding and severance funding within limits, plus extra pension funding under tax-efficient Amendment 190.
Did you travel on business this year? Keep the receipts for flights, accommodation, rental cars, and children’s education if applicable. Note the dates, as generous per-diem subsistence deductions of $100-$208 (in 2025) may be claimable
On the personal side, Loss utilization needs a lot of planning. Capital losses realized from selling securities in 2025 may be offset against capital gains, dividends, or interest from securities in 2025. Excess capital gains may be carried forward without limit, not back, for offset against future capital gains.
Are you expecting an inheritance from abroad? If so, plan against double taxation – inheritance/estate tax abroad and capital-gains tax in Israel upon a subsequent sale.
Personal investments: Check inter alia whether to take any losses and/or any Israeli foreign tax credit or aliyah exemption. Olim in year nine, holding shares in controlled foreign companies or foreign professional companies, may lose the last few months of their 10-year exemption on January 1 under a controversial position of the Israel Tax Authority.
Most trusts with an Israeli resident settlor or beneficiary are now taxable in Israel, unless an aliyah exemption applies. A trust might be worth considering if: (1) beneficiaries all reside outside Israel; (2) to carry tax losses from generation to generation; (3) for beneficiaries who can’t handle money, etc.
Are your pension, study funds (hishtalmut), and life insurance enough? See above.
Israeli real estate, briefly: Israeli home-rental income over NIS 5,654 per month (in 2025) is taxable. Above that level, there are multiple possibilities, so check which suits you.
Charitable donations in 2025 to approved Israeli charities in the year may qualify for a 35% tax credit, within limits (minimum NIS 207, maximum NIS 10,354,816 or 30% of income).
For example, if you donate NIS 1,000, you may get a NIS 350 reduction in your Israeli tax bill. For donations by Israeli residents to US “friends of” Israeli charitable causes, the limit under the US-Israel tax treaty is 25% of US taxable income.
As always, consult experienced tax advisers in each country at an early stage in specific cases.
leon@hcat.co
The writer is a certified public accountant and tax specialist at Harris Consulting & Tax Ltd.