Preferred Technological Enterprise status is tiered, with rates well below the standard corporate rate. How the tiers are structured and what evidence the Innovation Authority evaluator looks for.
- Dividend surtax layering
- Four-tier corporate tax structure
- How does the Preferred Technological Enterprise tax rate actually work?
Israel applies a standard 23% corporate income tax rate, but the more consequential feature for technology and R&D-intensive businesses is the tiered "Preferred Enterprise" and "Preferred Technological Enterprise" regime under the Law for the Encouragement of Capital Investments: qualifying companies can pay 16% (7.5% in development zones) as a Preferred Enterprise, 12% (7.5% in development zones) as a Preferred Technological Enterprise, or as low as 6% for technology groups with consolidated global revenue above ILS 10 billion.
What a company pays in Israel. Every figure below is published on the Israel country page.
| Israel | |
|---|---|
| Corporate tax rate | 23% standard · 16%/12% Preferred & Preferred Technological Enterprise tiers (7.5% in development zones) · 6% for tech groups with consolidated revenue above ILS 10 billion |
| VAT standard rate | 18% |
| VAT reduced rates | None — exports and international services are zero-rated; financial services and residential rentals are exempt |
| Accounting standard | Israeli GAAP, aligned with IFRS (mandatory IFRS for entities reporting under the Israeli Securities Law) |
| Currency | ILS (Israeli new shekel) |
What makes it complex in Israel
- Dividend surtax layering — — the standard 25%/30% dividend withholding stacks with an additional 2–3% surtax once an individual's annual capital income exceeds ILS 721,560.
- Four-tier corporate tax structure — — from 23% standard down to 6% for large technology groups, each tier gated by distinct IP-sourcing and revenue thresholds that must be evidenced annually.
How does the Preferred Technological Enterprise tax rate actually work?
A company must show at least 20% of revenue from IP developed in Israel (or, at group level, that 55% of Israeli revenue is Preferred or Technological Income) to qualify. Rates then range from 16%/12% depending on enterprise type and zone, down to 6% for technology groups with consolidated global revenue above ILS 10 billion. Qualification is reviewed annually, not granted permanently at setup.
What is the 2026 top-up tax and who does it affect?
From 2026, Israel's Qualified Domestic Minimum Top-up Tax (QDMTT) sets a 15% effective minimum tax rate for any Israeli entity that is part of a multinational group with consolidated global revenue above €750 million. For such groups, a nominal 6% or 12% preferential rate no longer guarantees that effective rate — a top-up tax closes the gap to 15%.
Dividend surtax layering is one of the points HTLC Network handles for clients operating in Israel, within a single engagement that covers every other country they operate in — executed locally, governed centrally.
In Israel the scope is: Statutory accounts, VAT filings, and corporate tax returns aligned with Israeli GAAP/IFRS, including the revenue-mix documentation that supports Preferred Technological Enterprise status.
See Accounting & Tax Compliance in Israel for the full scope, or the Israel country page for the statutory framework across every service.
Figures as published on the HTLC Network country pages, reviewed September 2026 and collected from public sources. They are not a substitute for advice on a specific case and should be verified before being relied on.