Are lottery winnings and gambling income taxable in Israel?

The exemption for Israeli state-licensed gambling is grounded in the Income Tax Ordinance [New Version] 5721-1961, Section 8(c), read together with the Sports Gambling Law 5727-1967, which establishes the Israel Football Pool Authority and governs Mifal HaPayis distributions. Prizes paid under these licensed schemes are treated as non-recurring, windfall receipts rather than income from a revenue source — and the Ordinance expressly exempts them from tax. This exemption is specific to the two Israeli state-licensed operators and does not extend to any gambling activity conducted outside that framework. The Israel Tax Authority has confirmed in published guidance that prizes from foreign lotteries — including major international lotteries commonly played by Israeli residents through online platforms — constitute taxable ordinary income from foreign sources, subject to the individual's marginal income tax rate. For a broader overview of how Israeli income tax applies to foreign-source income, see the full guide.

An Israeli tax resident who wins a meaningful sum from a foreign lottery, online casino, or poker tournament must declare the winnings in their annual income tax return (Form 1301) and pay tax at their marginal rate — currently up to 50% for high earners, plus applicable National Insurance contributions. A new immigrant (oleh chadash) or qualifying returning resident (toshav chozer) who wins from a foreign gambling source during the 10-year tax exemption period granted under Section 14 of the Income Tax Ordinance may be able to exclude these winnings from Israeli taxable income, provided the winnings qualify as foreign-source income and the exemption has not been individually waived. Non-residents visiting Israel who win from a foreign lottery have no Israeli tax liability on those winnings, as there is no Israeli-source connection. Israeli residents who regularly participate in professional-level poker or sports trading should be aware that the ITA may characterize consistent winnings as income from a business activity, potentially requiring VAT registration as well.

From the full guide: Israeli Income Tax for Non-Residents: A Practical Guide

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