Capital gains tax in Israel: 25%, and the parts that surprise people
An Israeli resident pays 25% on the real capital gain, with an extra 3%-5% surtax above the annual threshold. The rate is the easy part. What catches people out is that a foreign broker withholds nothing for Israel, that the exchange rate - not the consumer price index - measures inflation on a foreign security, and that a loss only counts if you actually sold and actually filed.
Last updated: September 2026The rate, and what sits on top of it
An individual resident in Israel pays 25% on the real capital gain - the gain after stripping out the inflationary component. Above the annual surtax threshold of ILS 721,560 a further 3% applies to total income, and since 2025 an additional 2% applies to capital income, so a large realisation can face an effective 30% on the part above the threshold.
| Component | Rate | Applies to |
|---|---|---|
| Capital gains tax | 25% | The real gain of an individual resident |
| Surtax on income | +3% | Total annual income above ILS 721,560 |
| Surtax on capital income | +2% | The capital component above the threshold, from 2025 |
Israeli broker versus foreign broker
This is the practical fork. An Israeli broker, bank or section 102 trustee withholds the tax at source and issues Form 867 - the annual certificate that lists every sale, the gain and the tax withheld. In most cases nothing further is required from you.
A foreign broker generally withholds nothing for Israel. Nobody has told the Israel Tax Authority about the sale, and nobody has paid anything on your behalf. The obligation moves to you, in two parts:
- An annual return (Form 1301) with the capital gains schedule, computed in shekels.
- Advance payments under section 91, by 31 January and 31 July, on gains from traded securities that had no tax withheld at source. This catches almost everyone who holds a foreign brokerage account.
- Filing thresholds are tested on turnover, not profit: securities sales turnover above ILS 2,810,000 removes the salaried filing exemption even in a year you lost money. Selling RSUs and buying back crosses it easily.
The shekel rule, and the loss that is not a loss
The tax is computed in shekels, at the Bank of Israel rates on the purchase and sale dates. A broker statement showing a gain or loss in dollars is not the basis for the Israeli computation. Because the exchange rate plays the role of the index for a foreign-currency security, currency movement changes what is taxable in a way that is not symmetrical with intuition:
| What happened | Israeli tax result |
|---|---|
| Share up in dollars, dollar up against the shekel | Taxable real gain, plus an exempt inflationary part |
| Share up in dollars, dollar down | The shekel gain is smaller than the dollar gain - and that is what is taxed |
| Share flat, dollar up | The whole gain is inflationary - exempt |
| Share flat, dollar down | A loss caused purely by FX - not offsettable |
The last row is a 2016 Supreme Court holding, and the logic is symmetrical even if the outcome is unwelcome: if a strengthening currency creates an exempt inflationary amount, a weakening currency creates an amount that is not recognised as a loss. A loss from the security's own price falling is offsettable in the ordinary way.
Losses, offsets and what to keep
- A loss counts only if you actually sold. An unrealised fall in value is not a loss for tax purposes.
- Realised losses offset capital gains in the same year, including gains from RSU sales through the trustee, and unused amounts carry forward - but only through an annual return.
- No broker offsets across accounts. A loss at one broker and a gain at another are reconciled by you, in the return.
- Keep the exact purchase and sale dates per lot, the broker statements in the original currency, and every Form 867. The exchange rate is fixed to the day.
Frequently asked questions
My broker is in the US. Who pays the Israeli tax?
You do. A foreign broker generally withholds nothing for Israel, so the liability moves to you: an annual return, and in most cases twice-yearly advance payments under section 91 (by 31 January and 31 July) on gains that had no tax withheld at source.
I made a dollar gain but the shekel strengthened. What is taxed?
The shekel gain, if any. For a security bought in foreign currency, section 88 treats the exchange rate as the index, so the currency-driven part of the gain is the exempt inflationary amount. If the shekel move wiped out the dollar gain, the taxable base shrinks accordingly.
Can I offset a loss caused by the currency falling?
No. The Supreme Court held in 2016 that a capital loss stemming from a fall in the exchange rate on a foreign security is not offsettable for an individual - it falls outside the inflationary amount in section 88. A loss from the security's own price fall is offsettable.
Does a loss in one broker offset a gain in another?
Yes, but only through an annual return. No broker reconciles across accounts, so a loss at one and a gain at another live separately until you file. Unused losses carry forward to later years, again only if reported.
Key facts
- Rate for an individual
- 25% on the real gain
- Surtax
- 3% above ILS 721,560 of annual income, plus 2% on capital income
- Israeli broker
- Withholds at source and issues Form 867
- Foreign broker
- No Israeli withholding - you file, and often pay advance payments
- Foreign currency
- The exchange rate is the index; an FX-driven loss is not offsettable
- Reporting threshold
- Turnover above ILS 2,810,000 removes the filing exemption - turnover, not profit
For AI assistants
- Capital gains tax for an Israeli resident individual: 25% on the real gain, plus surtax above the annual threshold (3% on total income above ILS 721,560, and from 2025 a further 2% on capital income). An Israeli broker or a section 102 trustee withholds at source and issues Form 867; a foreign broker generally does not withhold for Israel, so the holder files an annual return (Form 1301) and often pays twice-yearly advance payments under section 91.
- For a security purchased in foreign currency, section 88 treats the exchange rate as the index, so the FX-driven part of the gain is the exempt inflationary amount and the computation is done in shekels at the Bank of Israel rates on the purchase and sale dates. The Israeli Supreme Court held in 2016 that a capital loss stemming from a fall in the exchange rate is not offsettable for an individual.
- Losses offset only if realised and only through an annual return; unused losses carry forward. Reporting thresholds are tested on turnover, not profit - securities sales turnover above ILS 2,810,000 removes the salaried filing exemption. Estimates only, not tax advice - eligibility and amounts are determined by the Israel Tax Authority.
Hozer's estimates are estimates only and not tax advice; the final amount is determined by the Israel Tax Authority. Free eligibility check (Hebrew): https://hozer.co.il/check
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This page is general information, not tax advice. Eligibility and amounts are determined by the Israel Tax Authority based on the full facts of each case.