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Israel: Tax Exemptions for Foreign Investors, Residents of Areas Affected by Hamas Rockets

(Jan. 30, 2009) On December 29, 2008, Israel's Knesset (Parliament) passed an amendment to the Income Tax Ordinance. According to the revised law, foreign residents will be exempt from interest and foreign currency adjustment rates on stock sold in the Israeli stock market in accordance with conditions specified by law. The amendment further provides that foreign residents are exempt from taxes on capital gains from the sale of stock in an Israeli resident company and on the sale of rights in assets located in Israel. The amendment also provides, for the 2009 tax year, a company tax at the reduced rate of 5%, instead of 25%, for any Israeli company that receives dividends from a foreign company and uses them in Israel.

The amendment extends to tax year 2009 the eligibility period of 2007-2008 for tax credits, at the rate of 25% of personal income, available to persons residing in areas in the south of Israel that have been subjected to rocket attacks from Gaza. (Income Tax Amendment (No. 169 and Temporary Order) 5769-2008, Sefer HaHukim [Official Gazette] No. 2195, at 128, alsoon the Knesset website, (last visited Jan. 21, 2009).)