Israeli Legislation.com
OrdinanceTax Law

Income Tax Ordinance [New Version]

פקודת מס הכנסה [נוסח חדש]

Published: 1961-04-25Last amended 2026-06-08✓ Amendment status checked against the Knesset legislation record on 2026-09-04
Premium
Unofficial English translation — for reference only. It may contain errors or omissions and cannot be relied on as a legal text. Only the Hebrew text published in Reshumot is legally binding.More

This English text was translated from the official Hebrew using a range of translation tools, and it undergoes ongoing checks and updates. It is not a certified translation.

Despite these checks, it may contain errors, omissions, or imprecise renderings of legal terminology and cross-references, and it may not yet reflect the latest amendments. It cannot be relied upon as a legal text.

The Hebrew text as published in Reshumot (ספר החוקים) and on the Knesset website is the sole authoritative and legally binding version. In any discrepancy, the Hebrew text prevails.

This translation is provided for informational purposes only and does not constitute legal advice. For use in legal proceedings, request a certified Expert Legal Opinion.

Chapter III: Income of Spouses

Registered Spouse§

64b.
(a)The assessing officer may determine, by notice to any two spouses, that one of them is the registered spouse for the purposes of this Law, in that the spouse's taxable income in the tax year preceding by two years the tax year under consideration for the first time for this purpose exceeded 50% of the total taxable income of both spouses.
(b)Notwithstanding the provisions of subsection (a), spouses may jointly notify the assessing officer in writing, at least three months before the commencement of a given tax year, that they elect that the other spouse shall be regarded as the registered spouse, provided that that spouse's income in the tax year preceding the tax year in which the notification was given is at least 25% of the income of the other spouse; for the purposes of this subsection and subsection (d)(2), "income in the tax year" – excluding income from a joint source of income under section 66(d) in respect of which the provisions of that section do not apply.
(c)Where neither spouse had taxable income in the tax year referred to in subsection (a), the assessing officer may determine one of them to be the registered spouse, and this shall not derogate from their right to act under subsection (b).
(d)
(1)Subject to the provisions of subsection (b), a determination or election of a registered spouse shall remain in effect for not less than five tax years, unless the two persons are no longer spouses or pursuant to a decision of the Director;
(2)notwithstanding the provisions of paragraph (1), where the income of the registered spouse as elected in a tax year is less than 25% of the income of the other spouse in that tax year, the assessing officer may determine a registered spouse for that tax year.
(e)The Director may prescribe by rules the manner of determination and election of a registered spouse.

Joint Assessment§

65.

The income of spouses shall be regarded, for the purposes of this Ordinance, as the income of the registered spouse and shall be charged in the registered spouse's name, and in respect of income from a transparent company as defined in section 64a1 and income from interest, discount charges or linkage differentials (for the purposes of this section – interest) as well as income transferred from a real estate investment fund, as defined in section 64a2, or from capital gain, the said income of the registered spouse shall be regarded as including such income of the registered spouse's child who has not yet reached the age of 18 in the tax year, unless the assets from which the income from interest, from a real estate investment fund or from capital gain was derived were received by inheritance, or originate from compensation or insurance monies received in respect of bodily injury.

File in the Names of Both Spouses§

65a.
(a)The file maintained by the assessing officer with respect to the income of spouses shall bear the names of both spouses.
(b)The provision of subsection (a) shall not apply until the end of the 1998 tax year to files opened prior to 24 Tevet 5749 (1 January 1989), except pursuant to a decision of the Director or pursuant to a written request submitted by the spouses or either of them to the assessing officer.

Separate Computation§

66.
(a)Notwithstanding the provisions of section 65 –
(1)a spouse who is not the registered spouse may claim that a separate computation of tax shall be made in respect of their income from personal exertion in a business or profession or from employment, including income from personal exertion as referred to in paragraphs (1) to (7) of the definition thereof in section 1, provided that with respect to such income that is a pension, a separate computation shall be made if the pension is paid in respect of employment income in respect of which the spouse who is not the registered spouse was entitled to a separate computation, or if the spouse who is not the registered spouse was entitled in the last five years before the commencement of payment of the pension to a separate computation in respect of the income by virtue of which the pension is paid;
(2)for the purpose of computing the tax, the taxable income that is not from personal exertion of the spouses shall be added to the taxable income of the spouse whose taxable income from personal exertion is higher; if the spouses had no taxable income from personal exertion, the income that is not from personal exertion shall be regarded as the income of the registered spouse;
(3)with respect to income from a transparent company as defined in section 64a1, income from a real property investment fund as defined in section 64a2, and income from interest or from capital gains, the income of the registered spouse shall be regarded as including such income of the registered spouse's child who has not yet reached the age of 18 in the tax year; for the purpose of this section, "interest" – as its meaning in section 65.
(b)Notwithstanding the provisions of subsection (a) and section 65, a spouse who had income from property that was in their ownership one year before their marriage, or from property received by inheritance during the marriage, may claim that a separate computation of tax shall be made in respect of such income, provided that if that spouse had other income in respect of which a separate tax computation was made, the income under this subsection shall be added to the other income.
(c)The following provisions shall apply with respect to the separate computation:
(1)the entitlement to deductions, credits and credit points under sections 34, 35, 36, 45a, 47, 47a and 121a, the tax benefit under section 10 and the tax discount under section 11 shall be available to each of the spouses;
(1a)a spouse may, even if their spouse has no income from personal exertion, request a separate computation in respect of their income from personal exertion, and shall be entitled, against the tax applicable to such income, to credit points as referred to in paragraphs (4) or (5);
(2)with respect to entitlement under section 37 of a beneficiary individual, as defined in that section, only ½ credit point shall be taken into account, and there shall be no entitlement to credit points under sections 38 and 39;
(3)entitlement to pension points under section 40(a) shall be available only to the registered spouse;
(4)the wife shall be entitled to 1/2 credit point under section 36a, and in addition and against the tax applicable to her income from personal exertion – to credit points for each of her children as follows:
(a)2½ credit points for each of her children in the year of birth, and ½ credit point for each of her children in the year of coming of age, 4½ credit points for each of her children commencing in the tax year following the year of birth and until the tax year in which the child reached the age of two, 3½ credit points for each of her children in the tax year in which the child reached the age of three, 2½ credit points for each of her children in the tax years in which the child reached the ages of four and five, and two credit points for each of her children commencing in the tax year in which the child reached the age of six and until the tax year preceding the year of coming of age; for the purpose of this sub-paragraph and paragraph (5), "year of birth" and "year of coming of age" – as defined in section 40(b)(3);
(a1)notwithstanding the provisions of sub-paragraph (a), if the year of birth of a child was in one of the years 2017 or 2018, the mother shall be entitled to choose whether one credit point out of the credit points to which she is entitled as referred to in that sub-paragraph, in the year of birth, shall be taken into account in the tax year in which the child was born or in the following tax year;
(b)(deleted)
(c)(deleted)
(d)(lapsed)
(4a)in computing the tax of a woman who married a widower, credit points for each of the widower's children shall be taken into account, as referred to in paragraph (4);
(5)the husband shall be entitled, against the tax applicable to his income from personal exertion, to credit points for each of his children, as follows:
(a)2½ credit points in the year of birth of the child;
(b)4½ credit points for each child commencing in the tax year following the year of birth and until the tax year in which the child reached the age of two, 3½ credit points in the tax year in which the child reached the age of three, and 2½ credit points in the tax years in which the child reached the ages of four and five;
(c)one credit point for each of his children commencing in the tax year in which the child reached the age of six and until the tax year preceding the year of coming of age;
(5a)(lapsed)
(6)in computing the tax of a man who married a widow, credit points for each of the widow's children shall be taken into account, as referred to in paragraph (5).
(d)
(1)the provisions of subsection (a) shall apply with respect to spouses who have a joint income source only if all of the following are met:
(a)the personal exertion of each of the spouses is required for the production of income from the joint income source;
(b)each of the spouses receives income that corresponds to their contribution to the production of income from the joint income source and that is in direct proportion to their contribution to the production of the income as aforesaid;
(c)if the income is produced at the spouses' place of residence – the place of residence serves, on a permanent basis, the joint income source and the majority of the activity of that income source is carried out at the place of residence;
(2)for the purpose of this subsection, "joint income source" – an income source of a spouse that is dependent on the income source of the other spouse.
(e)(Repealed)

General Provisions§

66a.
(a)
(1)For every matter under this Ordinance, the spouse who is not the registered spouse may also object and appeal with respect to that spouse's share of the income;
(2)if one of the spouses has filed an objection or appeal, the other may not do so, with respect to the same tax year, except within thirty days from the day on which the assessing officer notified both spouses of the objection or appeal filed by one of them.
(b)The provisions of this Ordinance with respect to collection and penalties shall apply also to the spouse who is not the registered spouse with respect to that spouse's share of the income, provided that a spouse who is not the registered spouse shall not be charged with an offence nor be liable to payment of an administrative fine by reason of an act or omission the duty to perform or to refrain from which is incumbent upon the registered spouse, if that spouse proves that the act or omission was done without that spouse's knowledge and that that spouse took all reasonable measures to prevent them.
(c)The assessing officer shall notify the spouse who is not the registered spouse of every action by the assessing officer that may affect that spouse's tax liability, and the time limits for proceedings in which a person is entitled to take action under this Ordinance shall be reckoned, for this purpose, from the day of receipt of the notice.
(d)Where spouses have given notice of the election of a registered spouse pursuant to section 64b(b), the tax debts that arose during the period of marriage may be collected from the person who was the taxpayer or from the former registered spouse or from the registered spouse at the time of collection; the provisions of this subsection shall apply, with the necessary modifications, also to tax refunds.
66b.§

(Repealed — תשע״ו־15)

Income of a Man and Woman in an Agricultural Farm§

67.
(a)Income derived from the personal exertion of a man and a woman in an agricultural farm, which is liable to tax under section 2(8) with respect to one of them, shall be deemed, for the purposes of this Ordinance, to be the income of the man and the woman, in accordance with the provisions of section 66(d).
(b)(Repealed).

Need to cite this law in a foreign court?

Eli Shimony Israeli Attorneys-at-Law provides certified Expert Legal Opinions on Israeli law within 24–48 hours, accepted by courts worldwide.

Contact Us →

Chapter III-A: A Resident of Israel Residing Abroad

A Resident of Israel Residing Abroad§

67a.

The Minister of Finance, with the approval of the Finance Committee of the Knesset, may prescribe rules concerning the deductions and credits that shall be allowed to an individual who is a resident of Israel and who has income from personal exertion produced or accrued outside Israel, including such income attributed to a shareholder from a transparent company as defined in section 64a1, and concerning the rate of tax that shall apply to that income and to other income that the individual has in the year in which that income accrued, all having special regard to the duration of the stay outside Israel, to the fact that the individual was sent from Israel for the purpose of producing that income, and to the conditions of living in the country in which that individual resided for the purpose of producing that income.

Need to cite this law in a foreign court?

Eli Shimony Israeli Attorneys-at-Law provides certified Expert Legal Opinions on Israeli law within 24–48 hours, accepted by courts worldwide.

Contact Us →

Chapter III-B: Participation Exemption for an Israeli Holding Company

Definitions§

67b.

In this Chapter –

"substantial shareholder" and "relative" – as defined in section 88;

"income" – including real property appreciation;

"Israeli holding company" – a company in which the qualifying conditions referred to in section 67c(a) are fulfilled;

"held company" – a body of persons in which the conditions referred to in section 67d are fulfilled;

"share package" – shares in a held company conferring a right to profits at a rate of at least 10%, which were held by an Israeli holding company for at least 12 consecutive months;

"qualifying share" – a share that is part of a share package;

"shares", in a body of persons that is not a company – rights to profits therefrom or voting rights therein;

"asset" – as defined in section 64a2;

"undistributed profits", of an Israeli holding company – all of the following:

(1)taxable income produced or accrued in the tax year;
(2)appreciation from a sale in the tax year of a right in real property or a right in a real property association;
(3)income that was exempt from tax in the tax year;

all after deducting therefrom the taxes paid thereon in Israel or outside Israel, and profits distributed therefrom in that year;

"chain of companies" – two or more bodies of persons holding, directly or indirectly, one in the other.

Israeli Holding Company§

67c.
(a)An Israeli holding company is a company in which all of the following conditions are fulfilled (in this Chapter – the qualifying conditions):
(1)it was incorporated in Israel and the control of its business and the management thereof are exercised in Israel only;
(2)it is not a public company as defined in section 2 of the Companies Law, and is not a financial institution as defined in the Value Added Tax Law;
(3)it is not a family company to which the provisions of section 64a apply, and is not a transparent company as defined in section 64a1;
(4)the provisions of Part 5-B did not apply to its incorporation, and the provisions of that Part or the provisions of section 70 of the Land Taxation Law did not apply to the transfer of an asset to it;
(5)for 300 days or more in each tax year, commencing from the tax year following the year in which it was incorporated, both of the following conditions are fulfilled:
(a)the original price of its shares in held companies, plus the balance of loans extended by it to held companies, was not less than NIS 50,000,000;
(b)the original price of its shares in held companies, plus the balance of loans extended by it to held companies, is 75% or more of the original price of all of its assets, including the balance of loans extended by it to held companies;
(6)it had no income under section 2(1), except for income in consideration of services rendered to the held company;
(7)it elected that the provisions of this Chapter shall apply to it, by notice signed by all of its shareholders and delivered to the assessing officer within 90 days from the date of its incorporation.
(b)If a qualifying condition was not fulfilled in the company in the year of its incorporation and in the year following, it shall be deemed as if it had never been an Israeli holding company.
(c)If a qualifying condition ceased to be fulfilled in an Israeli holding company after the period referred to in subsection (b), it shall cease to be an Israeli holding company as from the beginning of the tax year in which the qualifying condition ceased to be fulfilled.
(d)An Israeli holding company may notify the administrator, by notice signed by all of its shareholders, that it has elected to cease to be an Israeli holding company; if it has so notified, it shall cease to be an Israeli holding company as from the beginning of the tax year following the tax year in which the notice was delivered to the administrator.

Held Company§

67d.

A body of persons in which all of the following are fulfilled is a held company:

(1)it is a foreign resident whose place of incorporation is in a reciprocating state and which files a return on its income in that state, or it is a foreign resident whose place of incorporation is in a state in which the rate of tax applicable to income of a body of persons from business activity was 15% or more at the time when the Israeli holding company first acquired its shares;
(2)75% or more of its income in the tax year, produced or accrued outside Israel, is income that, had it been liable to tax in Israel, would have been liable as business income under section 2(1); in computing such income, a proportionate share of the income of related companies shall be added thereto, however, income from management fees paid by a related party, consideration from the sale of an asset and dividends from income of related companies shall not be taken into account; for the purposes of this paragraph –

"asset" – excluding a security traded on a stock exchange, issued by a company in which the held company is not a controlling shareholder;

"proportionate share of the income of related companies" – the proportionate share of a body of persons in the income of a body of persons that is a foreign resident, in which it has a right to profits, directly or indirectly, in accordance with its share in the right to profits, provided that a right to profits at a rate lower than 10% shall not be taken into account; the share of a body of persons in such rights indirectly shall be computed by multiplying the rates of the rights to profits in each body of persons in the chain of companies, held by it directly or indirectly;

(3)the cost of its assets in Israel does not exceed 20% of the cost of all of its assets in each tax year; for the purposes of this paragraph, "assets in Israel" – including a right in a body of persons that is a foreign resident, the majority of whose assets are rights, directly or indirectly, in assets situated in Israel;
(4)its income in the tax year, including from the sale of real property or rights in a real property association, produced or accrued in Israel, does not exceed 20% of all of its income in the tax year.

Exemption for Income of an Israeli Holding Company§

67e.
(a)An Israeli holding company shall be exempt from tax on all of the following:
(1)capital gain from the sale of a qualifying share;
(2)a dividend received by it in respect of a qualifying share, if distributed during a period of not less than 12 consecutive months during which the Israeli holding company was a substantial shareholder in the held company;
(3)interest, dividend and capital gain from securities traded on a stock exchange in Israel;
(4)interest and linkage differentials received by it from a financial institution as defined in the Value Added Tax Law.
(b)No credit shall be granted in respect of foreign taxes on income exempt from tax pursuant to the provisions of subsection (a).
(c)The Minister of Finance, with the approval of the Finance Committee of the Knesset, may prescribe an exemption from tax for interest received by an Israeli holding company from a held company, if the interest was paid during a period prescribed by the Minister and at an interest rate prescribed by the Minister, all subject to such conditions and adjustments as the Minister shall prescribe.

Dividend Distributed by an Israeli Holding Company§

67f.
(a)A dividend received by a shareholder who is a foreign resident from an Israeli holding company shall be liable to tax at a rate of 5%.
(b)A dividend received by a shareholder who is a resident of Israel from an Israeli holding company shall be liable to tax at the rates referred to in paragraph (1) or (2), as the case may be:
(1)if the recipient of the dividend is an individual – the rate prescribed in section 125b, as the case may be;
(2)if the recipient of the dividend is a body of persons – the rate prescribed in section 126.

Deemed Dividend§

67g.
(a)A resident of Israel who was, at the end of the tax year, a shareholder, directly or indirectly, in an Israeli holding company, shall be deemed as if that person received, as a dividend, at the end of the tax year, that person's proportionate share of the undistributed profits, and shall be liable to tax on such profits as referred to in section 67f(b).
(b)The provisions of subsection (a) shall not apply to a shareholder who was an indirect shareholder in an Israeli holding company through another shareholder who is a resident of Israel, if the provisions of subsection (a) applied to the other shareholder, and this with respect to the share of the undistributed profits on which the other shareholder was assessed to tax under subsection (a).
(c)If a shareholder who is a resident of Israel received a dividend that originates, directly or indirectly, in the income of an Israeli holding company, the dividend shall not be liable to tax if tax thereon was paid under the provisions of subsection (a) by that shareholder or by the person from whom that shareholder received the shares in a tax-exempt sale or by inheritance; if a loss was set off against income referred to in subsection (a), it shall be deemed, for the purposes of this subsection, as if tax under subsection (a) was paid on the income against which the set-off was made.

Special Provisions for Persons Who Became Residents of Israel§

67h.

Notwithstanding the provisions of section 67f(b) and section 67g, the following provisions shall apply to an individual who is a shareholder in an Israeli holding company and who held its shares before becoming a resident of Israel for the first time, a veteran returning resident or a returning resident, as referred to in section 14(a) and (c):

(1)a dividend received by that individual from the Israeli holding company during the period in which that individual is entitled to benefits under section 14(a) or (c), as the case may be, shall be liable to tax at a rate of 5%;
(2)the provisions of section 67g with respect to the proportionate share of undistributed profits shall not apply to profits as aforesaid that originate in a dividend received by the Israeli holding company from a company that is a foreign resident, the shares of which were acquired before that individual became a resident of Israel as referred to in section 14(a) or (c), nor to profits originating in capital gain accrued to the Israeli holding company from the sale of shares in a company that is a foreign resident, the shares of which were acquired as aforesaid, all during the period in which, pursuant to section 14(a) or (c) or section 97(b), such income would have been exempt from tax in the hands of the shareholder had it been received directly by that shareholder.

Sale of a Share in an Israeli Holding Company§

67i.
(a)Upon the sale of a share in an Israeli holding company by a resident of Israel, that person shall be granted a credit against the tax applicable to the capital gain, in an amount equal to the tax paid by that person or by the person from whom that person received the shares in a tax-exempt sale or by inheritance, on the undistributed profits under section 67g in respect of the share sold, provided that such profits have not yet been received as a dividend; the amount of tax so paid shall be adjusted in accordance with the rate of increase of the index from the end of the tax year in which the undistributed profits are deemed to have been received as a dividend, until the date of sale of the share, provided that no credit shall be granted in an amount exceeding the tax applicable upon the sale of the share.
(b)The provisions of section 94b shall not apply upon the sale of a share in an Israeli holding company with respect to profits available for distribution as defined in section 94b, in respect of which the seller paid tax under section 67g(a).

A Company That Ceased to Be an Israeli Holding Company§

67j.
(a)For the purposes of this section –

"qualifying portion of the real capital gain" – the real capital gain multiplied by the ratio between the period from the date of acquisition to the end of the termination year and the period from the date of acquisition to the date of sale;

"balance of the real capital gain" – the difference between the real capital gain and the qualifying portion of the real capital gain;

"termination year", with respect to a company that ceased to be an Israeli holding company – if it ceased pursuant to section 67c(c) – the year preceding the year in which the qualifying condition ceased to be fulfilled, and if it ceased pursuant to section 67c(d) – the year in which the notice pursuant to that section was given.

(b)Where a company ceased to be an Israeli holding company, the following provisions shall apply:
(1)if the company sold, in any year following the termination year, an asset that, had it been sold while the company was an Israeli holding company, the company would have been exempt from tax on its sale in accordance with the provisions of section 67e(a), the company shall be exempt from tax on the qualifying portion of the real capital gain and liable to tax on the balance of the real capital gain;
(2)a dividend distributed by the company to a foreign resident in any year following the termination year, originating in profits accumulated in the company in the years in which it was an Israeli holding company, or originating in the qualifying portion of the real capital gain, shall be liable to tax at a rate of 5%;
(3)a resident of Israel who is a shareholder in the company, directly or indirectly, shall be deemed as if, at the end of the tax year in which the company sold an asset as referred to in paragraph (1), that person received, as a dividend, that person's proportionate share of the qualifying portion of the real capital gain, and shall be liable to tax thereon as referred to in section 67f(b), and the provisions of sections 67f and 67g shall apply accordingly.

Restriction on the Application of Section 75b§

67k.
(a)In this section, "controlled foreign company" and "undistributed profits" – as defined in section 75b(a).
(b)Where a held company is a controlled foreign company, the provisions of section 75b shall not apply to the Israeli holding company holding it nor to a controlling shareholder therein who is a resident of Israel, with respect to undistributed profits from the held company; a shareholder shall not be regarded as a resident of Israel solely by reason of being a shareholder in an Israeli holding company.

Need to cite this law in a foreign court?

Eli Shimony Israeli Attorneys-at-Law provides certified Expert Legal Opinions on Israeli law within 24–48 hours, accepted by courts worldwide.

Contact Us →
← 1…121314…35 →

Page 13 of 35

Read the entire law on one page — continuous text, no page breaks, plus PDF downloads.