Individual Taxation

Non-resident sare exempt from capital gains tax in the following circumstances:

• selling shares in an Israeli company that is listed on the Israeli stock exchange or a foreign stock exchange.
• sale of non-traded shares in an Israeli company acquired after January 1, 2009. It should be emphasized that a foreign resident must fulfill several requirements outlined in the Income Tax Ordinance to be eligible for an exemption.

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 an employment 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.

Dividends are usually taxed at a rate of 25 %or 30% if a shareholder owns 10% or more of the company. In the case of a double taxation treaty, this can result in a lower tax rate for a foreign resident.

The Income Tax Ordinance requires a payer to a non-resident to withhold income tax from any payment that constitutes taxable income in their hands. However, the Income Tax Regulations allow the payer to withhold income tax at a reduced rate or not withhold income tax at all, under certain conditions.

In order to streamline the procedures for transferring funds abroad, the Israel Tax Authority published a green lane in September 2017 that allows a banking institution to transfer a payment to a non-resident based on a declaration by the payer on a dedicated form. This is done without the need to obtain approval for withholding income tax from the Israel Tax Authority. The payer must meet the following conditions:

• The payment is made to a resident of a tax treaty country and to a bank account in a tax treaty country
• The payment is made for one of the following purposes:

1. Investment in shares of a company
2. Investment in real estate abroad
3. Investment in other tangible assets abroad
4. Providing a loan to a non-resident
5. Providing a shareholder loan to a company
6. Refunding a loan principal by a company (with the approval of an accountant)
7. Investment in partnership rights
8. Purchase of options
9. Excess of the exercise price paid in the exercise of options

• Assets located out side of Israel that are essentially a direct or indirect right to an asset or inventory, or which are an indirect right to a real estate right or asset in an Israeli real estate association. The tax applies only to the part of the consideration derived from theaforementioned property in Israel.
• Assets in Israel.
• Activities consisting of a share or the right to participate in an Israeli company
• Assets in an entity resident abroad that effectively constitute a direct or indirect property right in Israel. Tax is only levied on the part of the consideration that comes from the Israeli property.