Tax & Finance

South Africa-Israel Double Tax Treaty: A Complete Guide for South African Investors, Olim, and Expats

By Adv. Eli Shimony September 1, 2026 13 min read
Quick Answer: The South Africa-Israel Double Tax Agreement (DTA), in force since December 2011, caps Israeli withholding tax on dividends paid to South African residents at 5% for qualifying corporate shareholders and 15% for all others, compared to Israel's domestic rate of 25-30%. Interest and royalties are both capped at 10%. Israel retains the right to tax capital gains on Israeli real property regardless of where the seller lives. Accessing reduced withholding rates requires a formal advance certificate from the Israel Tax Authority (ITA); the lower rate is not applied automatically. South Africans who are planning to emigrate to Israel, or who already hold Israeli assets, face additional considerations around South Africa's exit tax and cessation of residency rules.

South Africa has an estimated 50,000 to 70,000 Jewish residents, many with direct family or financial connections to Israel, and a broader South African business community that trades and invests across both countries in agri-tech, mining finance, and software. For anyone in that position (receiving income in one country while resident in the other, or holding assets in both), the South Africa-Israel DTA sets out who taxes what, at what rate, and what paperwork is needed to access the lower rates.

Without the treaty, a South African shareholder receiving dividends from an Israeli company faces Israeli withholding at 25-30% with no guaranteed credit back home. The DTA caps that withholding at 5% or 15% and requires both countries to credit taxes paid to the other, so the same profit is not taxed twice. On a significant dividend or intercompany loan, the saving can reach hundreds of thousands of shekels, but only if the advance certificate is in hand before the payment is made.

1. Treaty Overview

The Convention between the Government of the State of Israel and the Government of the Republic of South Africa for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income was signed in Jerusalem on 9 September 2010 and entered into force on 27 December 2011.

The treaty follows the OECD Model Convention closely and covers taxes on income imposed by both countries. On the Israeli side, this means *mas hachnasa* (income tax), *mas chevrot* (corporate tax), and *mas shevach* (capital gains tax) under the Income Tax Ordinance [New Version], 5721-1961. On the South African side, it covers income tax (including capital gains tax) under the Income Tax Act No. 58 of 1962, administered by SARS (South African Revenue Service).

Both Israel and South Africa signed the OECD Multilateral Instrument (MLI). Certain anti-avoidance provisions now apply on top of the bilateral DTA, most importantly the Principal Purpose Test, which lets tax authorities deny treaty benefits if obtaining them was a main purpose of a transaction or structure. Arrangements designed primarily to route income through either country to access treaty rates should be reviewed against the MLI before implementation.

Key rates under the South Africa-Israel DTA at a glance:

In Practice: A South African private equity fund holds 20% of an Israeli portfolio company. The company distributes a NIS 2 million dividend. Without a treaty certificate, Israeli withholding at the domestic 30% rate amounts to NIS 600,000. With a valid ITA reduced-withholding certificate confirming the 5% treaty rate (qualifying corporate holding, over 10% of share capital), the withholding drops to NIS 100,000, a saving of NIS 500,000 on a single distribution. SARS then credits the NIS 100,000 against South African corporate tax on the same dividend. The ITA certificate must be obtained before the payment date; certificates cannot be applied retroactively without a separate refund claim.

2. Dividend Withholding Rates

Article 10 of the DTA provides two tiers of withholding on dividends paid to South African residents:

The 5% rate is only available to corporate beneficial owners. Individuals and trusts holding Israeli shares face the 15% treaty rate rather than Israel's domestic 25-30%. For South African family trusts that own Israeli property companies, 15% still saves 10-15 percentage points over the Israeli domestic rate, but the trust must itself be the beneficial owner of the dividend. A trustee who passes dividends straight through to the underlying beneficiaries may face ITA scrutiny over whether the trust is a genuine beneficial owner or a pass-through conduit.

On the South African side, dividends from foreign companies are generally exempt from South African dividends tax under Section 10B of the Income Tax Act, 1962, once withholding tax has been paid in the source country. The exemption has conditions tied to the participation level and the anti-avoidance rules in Section 8EA (dividend stripping). South African companies receiving Israeli dividends should confirm the Section 10B exemption applies before assuming the dividend arrives tax-free in South Africa.

In Practice: A South African individual holds 8% of an Israeli technology company and receives a NIS 300,000 dividend. She does not qualify for the 5% rate (shareholding below 10%). With a valid ITA certificate confirming the 15% treaty rate, the Israeli company withholds NIS 45,000. Without a certificate, the company withholds NIS 75,000–90,000 at the domestic rate. The individual then reports the dividend on her South African return and claims a foreign tax rebate under Section 6quat of the Income Tax Act, 1962 for the Israeli tax withheld, which reduces the South African tax assessed on that dividend income.

3. Interest and Royalties

Articles 11 and 12 both cap withholding at 10%. For interest, this covers bonds, bank deposits, loans, and debentures. Israeli companies that borrow from South African lenders (including common intercompany loan arrangements where a South African parent funds an Israeli subsidiary) benefit from the 10% cap against Israel's domestic withholding on interest to non-residents, which can reach 25% or more depending on the instrument and the assessing officer's position.

For royalties, the 10% cap applies to payments for the use of patents, trademarks, know-how, design, secret formulas, and copyrights. Software licenses are a recurring classification problem: the ITA typically treats a non-exclusive software license that does not transfer commercial exploitation rights as a service payment, taxable only where the service provider has a permanent establishment in Israel. Where there is genuine uncertainty about classification, a tax opinion before the first payment is worthwhile. A mismatch between what the payer characterizes as a service and what the ITA characterizes as a royalty can create unexpected withholding obligations.

In Practice: An Israeli agri-tech company borrows R 30 million (approximately NIS 22 million at mid-2026 exchange rates) from its South African parent at 7% annual interest. The annual interest payment is approximately NIS 1.54 million. Israel's domestic withholding on interest to a non-resident company can reach 25% (NIS 385,000). A reduced-withholding certificate from the ITA's International Tax Unit (*Yechida le'Mas Bein Leumi*) at the relevant Tax Assessing Office reduces the rate to 10% (NIS 154,000), saving NIS 231,000 per year. The South African parent must supply an ITA-certified Tax Residency Certificate (issued by SARS) as part of the ITA application package. ITA processing typically takes four to eight weeks; payments made before the certificate arrives are subject to full domestic withholding.

4. Capital Gains on Israeli Property

Article 13 of the DTA follows the standard OECD pattern: gains from the disposal of immovable property (*mas shevach*) situated in Israel are taxable by Israel, regardless of whether the seller is a South African resident. A South African who sells an Israeli apartment, commercial property, or land pays Israeli capital gains tax on the disposal under the Land Taxation Law (*Chok Misui Mekarkein*), 5723-1963, even if they have never set foot in Israel during the year of sale.

The treaty also contains an immovable-property-rich company clause: shares in a company whose value derives principally from Israeli real property may be taxed by Israel even when the seller is a South African resident. This catches common structures where South African families hold Israeli apartments through a private company rather than directly.

For gains on shares in ordinary Israeli companies (not property-rich), the treaty allocates taxing rights to South Africa as the country of residence. South Africa then taxes the gain under its Capital Gains Tax (CGT) rules in the Eighth Schedule to the Income Tax Act and grants a credit under Section 6quat for any Israeli tax paid. Where Israel does not tax a particular share gain, the full SA CGT liability remains. South Africa's maximum effective CGT rate is 18% for individuals and up to 22.4% for companies (using the inclusion rate and maximum marginal rates).

In Practice: A South African resident individual sells a Tel Aviv apartment for NIS 3.8 million. The apartment was purchased in 2015 for NIS 1.9 million. Under Israeli domestic law, the taxable gain is divided into a real gain (*shevach amiti*, inflation-adjusted) and a nominal gain (*shevach afasiyati*), each taxed at different rates. The Israel Tax Authority (ITA) collects *mas shevach* through the *mashed* (real estate taxation office) before title transfer. South Africa then assesses the same gain in ZAR at the exchange rate on the disposal date, grants a credit for the Israeli tax paid under Section 6quat, and charges SA CGT on any residual gain above the credit. The practical effect is that the higher of the two countries' tax rates applies to the overall gain.

5. South African Tax Residency and Cessation Rules

South Africa taxes its residents on worldwide income. A person qualifies as a South African tax resident under one of two tests: the ordinary residence test (is South Africa the country to which the person intends to return after temporary absences?) or the physical presence test (present in South Africa for at least 91 days in the current and each of the five prior years, and at least 915 days in total across those five prior years).

When a South African resident permanently relocates to Israel (whether through *aliyah* or other migration path), they must actively cease South African tax residency. The steps are:

  1. File a SARS return confirming the date of cessation. The date is the earlier of the date the person ceased to be ordinarily resident in South Africa or the day before the DTA tie-breaker makes them an Israeli resident.
  2. Pay the exit tax under Section 9H of the Income Tax Act. On the date of cessation, all assets are deemed disposed of at market value and any resulting capital gain is included in the final South African return. Assets excluded from the deemed disposal include immovable property situated in South Africa (taxed when actually sold) and interests in South African pension funds.
  3. Obtain SARS approval of international transfers (SARS IT-21 compliance). Before moving significant capital offshore, including repatriating accumulated savings, the person must obtain a Tax Compliance Status confirmation for foreign investment allowance purposes.

The DTA's tie-breaker in Article 4 determines residency when both countries claim a person as a tax resident simultaneously. The sequence is: permanent home, centre of vital interests, habitual abode, nationality, and (if still unresolved) mutual agreement between the ITA and SARS. Most South Africans who make formal aliyah and close their South African home will satisfy the tie-breaker in Israel's favour from the arrival date, but the SARS cessation process still needs to be completed separately.

In Practice: A South African professional sells her Cape Town property and makes aliyah on 1 March 2026. On 28 February 2026 (the day before she ceases to be a South African tax resident), Section 9H deems her to have disposed of her Israeli share portfolio and any other foreign assets. The resulting capital gain is taxed in her final South African return. If the deemed gain is large, she can apply to SARS for a payment deferral in exchange for a guarantee. She must file the cessation return by 31 January 2027 (covering the period 1 March 2025 to 28 February 2026) and submit a SARS IT-21 before transferring assets to Israel. From 1 March 2026, Israel taxes her as an Israeli resident. Under Section 14 of Israel's Income Tax Ordinance, new immigrants receive a 10-year exemption on foreign-source income, so her South African investment income remains sheltered in Israel for a decade.

6. Employment Income and the 183-Day Rule

Article 15 of the DTA governs salaries and wages. The default rule is that employment income earned for work performed in Israel is taxable by Israel. A South African employee sent to Israel on a temporary assignment qualifies for an exemption (pays only South African tax) when all three conditions are satisfied:

  1. The employee is present in Israel for no more than 183 days in any 12-month period beginning or ending in the Israeli tax year (January 1 to December 31);
  2. The salary is paid by, or on behalf of, an employer who is not a resident of Israel; and
  3. The salary cost is not borne by a permanent establishment that the South African employer has in Israel.

When all three conditions are met, only South Africa taxes the income. The DTA exemption and South Africa's own expatriate exemption under Section 10(1)(o)(ii) of the Income Tax Act interact here: Section 10(1)(o)(ii) exempts South African residents from SA income tax on employment income earned outside South Africa for more than 183 days in a 12-month period (including at least 60 consecutive days). As of March 1, 2020, this exemption is capped at R1.25 million per year. Employment income above R1.25 million remains subject to South African income tax, regardless of how many days the employee spends outside South Africa.

Where the 183-day DTA threshold is crossed, Israel taxes the salary from day one, not just from day 184. South African employees on extended Israeli assignments should engage a licensed Israeli payroll provider and register with the ITA before the 183-day mark, not after. Failure to do so typically results in penalties for late registration and late payment of *memas mekorot* (withholding at source) by the employer.

In Practice: A South African engineer is seconded to an Israeli renewable energy company from January 15 to July 28, 2026 (193 days), crossing the 183-day threshold. His South African employer must register with the ITA as a foreign employer with Israeli payroll obligations and commence withholding Israeli income tax and National Insurance (*Bituach Leumi*) contributions from the point the 183-day mark was crossed. His R950,000 South African salary is under the R1.25 million Section 10(1)(o)(ii) cap, so South Africa does not tax it. Israel taxes it in full. He files an Israeli annual return for 2026 and claims a Section 6quat rebate in South Africa for the Israeli tax withheld, resulting in no double taxation on the same income.

7. How to Claim Treaty Benefits

Reduced withholding rates under the DTA are not self-executing. Israeli domestic law requires a formal reduced-withholding certificate (*nikui memas mekorot*) from the ITA under Section 170 of the Income Tax Ordinance [New Version], 5721-1961 before the lower rate can be applied. Payments made before the certificate is issued are subject to full domestic withholding; recovering the excess through a refund claim (*bakshat heshtachvut*) typically takes six to eighteen months.

Israeli process (South African residents receiving Israeli-source income)

  1. Obtain a Tax Residency Certificate from SARS. South African residents request a TRC from SARS (via the SARS eFiling portal). SARS issues the certificate as a signed letter confirming the applicant's South African tax residency and the applicable treaty. A new TRC is required each calendar year.
  2. Apply to the ITA's International Tax Unit. Submit the SARS TRC together with a declaration of beneficial ownership, a description of the income stream, and basic corporate or personal documentation to the ITA's International Tax Unit at the relevant assessing office (Tel Aviv 5 for major corporate matters, or the assessing office corresponding to the Israeli payer's location).
  3. Wait for the certificate. The ITA typically processes applications within four to eight weeks. Urgent applications can be escalated, but there is no statutory deadline. Seasonal backlogs around the March annual filing period can extend processing to twelve weeks.
  4. Present the certificate to the Israeli payer. The Israeli company withholds at the certified rate (5%, 15%, or 10% depending on income type) and issues a withholding certificate (*teudat nikui*) to the South African recipient for use in the South African Section 6quat rebate claim.

South African process (Israeli residents receiving South African-source income)

Israeli residents receiving South African dividends, interest, or royalties must obtain an Israeli TRC from the ITA and supply it to the South African payer before the payment. The South African payer then withholds at the treaty rate rather than South Africa's domestic dividends withholding tax rate of 20% or the domestic withholding rate on interest and royalties. SARS accepts the ITA's TRC; an Israeli TRC takes three to four weeks to obtain from the ITA's International Tax Department. It must be renewed each year.

In Practice: A South African company holds 15% of an Israeli manufacturing company. The Israeli company plans a NIS 1.5 million dividend distribution in November 2026. To apply the 5% treaty rate, the South African company must submit its SARS TRC together with the treaty application to the ITA at least eight weeks before the planned distribution (mid-September at the latest). If the application arrives late and the ITA has not yet issued the certificate by distribution date, the Israeli company withholds at 30% (NIS 450,000). The South African company then files a refund claim with the ITA, which can take 12 to 18 months. Planning the certificate application well in advance of any distribution is the single most effective way to avoid this outcome.

Frequently Asked Questions

Once a South African completes aliyah and formally ceases South African tax residency, the DTA applies to them as an Israeli resident, not as a South African resident. They use the treaty to access reduced withholding rates on South African-source income (such as dividends from a South African company they still hold). South Africans who make aliyah but have not formally completed the SARS cessation process remain South African tax residents for SARS purposes and must continue filing South African annual returns on their worldwide income, including Israeli-source income. The DTA tie-breaker in Article 4 ultimately determines which country has the primary taxing right when residency is genuinely dual.

Section 9H of the Income Tax Act, 1962 imposes a deemed disposal of all assets on the day before a South African resident ceases to be a resident. Any gain arising from that deemed disposal is included in taxable income and subject to South African CGT at normal rates. Assets situated in South Africa (including South African real property) are excluded from the deemed disposal and taxed when actually sold. Israeli real property is subject to the deemed disposal, but since Israel also taxes the eventual actual sale under the land taxation law, careful timing of the Section 9H deemed disposal (in terms of the exchange rate and market values at cessation) is important. South Africans planning emigration to Israel should take professional advice on the timing and value of assets before the cessation date is fixed.

Article 13 of the DTA gives Israel the exclusive right to tax gains on Israeli immovable property regardless of the seller's residence. South Africa retains the right to include the same gain in the South African resident's taxable income, but must grant a Section 6quat rebate for the Israeli tax paid. The practical result is that the higher effective rate between Israel and South Africa applies. For a South African individual, South Africa's effective CGT rate (maximum 18% of the gain) may be lower than Israel's *mas shevach* rate for a long-held property (typically around 25%), so South Africa would not charge additional tax once the Israeli liability is credited. However, the SA return must still be filed and the gain reported.

No. South Africa and Israel do not have a totalization agreement covering social security contributions. South African employees working in Israel face parallel contribution obligations: Israeli *Bituach Leumi* (National Insurance Institute) contributions under the National Insurance Law [Consolidated Version], 5755-1995, and South African SDL (Skills Development Levy) and UIF (Unemployment Insurance Fund) obligations if the SA employment relationship continues. South African employers sending employees to Israel on secondment should confirm with an Israeli labor law specialist whether the employee qualifies for any contribution deferral or exemption under the B/1 work permit conditions. The absence of a totalization agreement is one of the most commonly overlooked cost items in cross-border secondment planning.

Potentially, but with complications. A South African trust is a taxable entity for SARS purposes and can qualify as a South African resident for DTA purposes if it is administered and effectively managed in South Africa. The trust would apply for a SARS TRC as a trust (not as an individual) and submit it to the ITA. However, the ITA and Israel's courts apply a substance-over-form approach to trusts: a bare trust with no genuine independent administration, or one that is clearly set up solely to access lower treaty withholding rates, may be denied treaty benefits under both the DTA's beneficial-ownership test and the MLI's Principal Purpose Test. A trust with a genuine South African trustee, real administrative activities, and assets that serve a non-tax purpose stands on much stronger ground.

Related Guides

Adv. Eli Shimony

Israeli attorney specializing in cross-border transactions, international tax planning, and estate matters. Advises foreign nationals, investors, and diaspora families on navigating Israeli law.

eshimony-law.com

Questions about the South Africa-Israel Tax Treaty?

Our team advises South African investors, olim, and expats on treaty certificate applications, withholding tax planning, exit tax strategy, and cross-border asset structuring between South Africa and Israel. Contact us for a free initial consultation.

Get Free Consultation