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Can a foreign-owned Israeli company freely transfer profits abroad as dividends?

Yes, Israel imposes no foreign exchange controls or repatriation restrictions on dividends paid by an Israeli company to foreign shareholders. Profits can be transferred abroad freely after paying the applicable Israeli dividend withholding tax. Under Section 125B of the Income Tax Ordinance (New Version) 5721-1961, dividends paid to foreign shareholders are subject to a 25% withholding tax, reduced to 15% or lower under Israel's double taxation treaties with many countries. The withholding tax must be deducted before the dividend is transferred, and the transfer amount itself is unlimited.

Israel does not maintain capital controls or currency restrictions limiting the transfer of profits abroad. The Bank of Israel Law 5770-2010 and the Currency Control Order — largely liberalized in the 1990s and fully in 2003 — leave dividend payments to foreign shareholders entirely unrestricted in terms of amount or frequency. What governs is the tax obligation: dividends distributed to a foreign shareholder are subject to Israeli withholding tax under Section 125B of the Income Tax Ordinance (New Version) 5721-1961, at the standard rate of 25%, or a reduced treaty rate if the shareholder is resident in a country with which Israel has a double taxation agreement (*Heskem Mashve Mas*). Common reduced rates are 5%–15% for dividends paid to a parent company holding a qualifying percentage of shares.

For foreign investors using an Israeli company as a holding or operating vehicle, the mechanics of dividend distribution are straightforward but require proper compliance. The Israeli company declares a dividend at a board or general meeting, deducts the applicable withholding tax, and remits the net amount to the foreign shareholder's bank account. The company must file a withholding tax return with the Israel Tax Authority (*Rashut HaMisim*) and pay the withheld tax within one month of distribution. If the foreign shareholder claims a reduced treaty rate, they must produce a certificate of tax residency from their home country's tax authority. Our guide on dividend tax for foreign investors in Israel sets out the treaty rates and the certificate process in detail.

⚖ In Practice
  • Governing law: Section 125B, Income Tax Ordinance (New Version) 5721-1961; Currency Control Order (liberalized 2003 — no capital controls in force)
  • Competent authority: Israel Tax Authority (Rashut HaMisim) for withholding filings; no Bank of Israel approval required for transfers
  • Standard withholding tax: 25% for individual foreign shareholders; common treaty rates 5–15% for qualifying parent companies
  • Payment deadline: Withholding tax must be remitted to the ITA within 30 days of the distribution date
  • Procedure: Board declaration of dividend, withholding deducted, ITA return filed, net proceeds transferred to foreign bank account — no cap on amount or frequency

From the full guide: Dividend Tax in Israel for Foreign Investors: Rates, Treaties, and Compliance

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Get a Free Consultation with Adv. Eli ShimonyPrepared under the direction of Adv. Eli Shimony, Eli Shimony Law Office · Editorial policy

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