Does Israel charge a high-income surtax on top earners?

Israel's personal income tax is progressive, and the surtax sits on top of the ordinary brackets. Section 121B of the Income Tax Ordinance charges the additional tax on aggregate annual income above a single indexed ceiling, so it can be triggered by salary, business profit, rental income, capital gains, dividends, and interest combined. Because the threshold is annual and cumulative, a taxpayer with several moderate income streams can cross it even without a very high salary. The Israel Tax Authority collects the surtax through the annual return, reconciling it against amounts already withheld during the year. A 2025 reform layered an additional charge on high capital income to increase the burden on passive earnings. Our guide to Israeli income tax for non-residents covers how the brackets fit together.

For a foreign national the first question is whether you are taxed on the income at all, which depends on Israeli tax residency and on any double taxation treaty. Non-residents are generally taxed only on Israeli-source income, so the surtax reaches a non-resident only on Israeli income that crosses the threshold. Israeli residents, including many new immigrants after their benefit period, are exposed on worldwide income. Sellers of high-value Israeli real estate should note that a large one-off capital gain can push a single year over the ceiling and attract the surtax. Because the threshold resets each year and is indexed, timing the realization of gains across tax years can change the outcome, and professional planning is worthwhile before a big transaction.

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

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