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Banks & Taxes in Israel

A Comprehensive Guide About Opening a Bank Account and Managing Your Taxes

Managing finances in Israel does not have to be a hassle with the right preparation. As soon as you are settled, you can easily open a bank account at one of Israel’s five major banks. However, when you do this, keep in mind that it is standard practice in Israeli banks to be charged for nearly every service. Make sure you ask about bank fees upfront and have a clear understanding of what they will be.

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Understanding bank accounts and the tax system in Israel is something every new expat will have to come to grips with once they arrive in the Holy Land. For example, did you know that several banks in Israel offer non-resident accounts? The process to open your account may take a little longer as you will have to go through a series of checks. However, these types of accounts often come with advantages such as better interest rates, and exemptions from certain taxes and other fees. This may be good news considering taxes in Israel are some of the highest in the world—even totaling to as high as 50% in income tax!

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How to Open a Bank Account in Israel

If you are wondering how to open a bank account in Israel for non-residents, this section will walk you through the steps. You may be asking yourself, “Can I open a bank account in Israel?” As a non-resident, the answer is yes, you can. Many institutions offer non-resident bank accounts for people with residences abroad. These have some advantages such as exemptions from certain taxes and fees, and even better interest rates.

Online banking information is typically in Hebrew, but most institutions do have English translations, in case you happen to be an Anglophone expat. Be aware though that the information may be limited compared to the Hebrew version. If you have questions or doubts, you might consider finding a bank with English-speaking staff. This should be no problem in large cities. However, if you do have problems, InterNations GO!’s Settling-In Services can help arrange professional services with people who speak your language like financial advisors, etc. We even advise on the best banking options, including accounts with multiple currencies and international transfer alternatives.

Banking options in Israel include commercial, investment, development banking, and cooperative credit institutions. All banks operate under the supervision of the national Central Bank, which also manages the country’s national currency.

International credit cards are widely accepted across Israel, so you should have no problem setting up your bank account upon arrival.

Setting Up an Israeli Bank Account

To set up your account, you will most likely need to go to the bank in person. It is possible to open a bank from abroad online. However, you will be subject to the same checks, and it will most likely require a video call with someone from the branch.

When you go to the bank in person, you do not need an appointment ahead of time. However, be sure to give yourself enough time as signing all the documents will take some time. The person at the bank will go over all the details of your account and provide you with instructions for online and telephone banking, using your cards, etc. Keep in mind that you may not have everything in order right away, but you should have access to the account within a day.

Requirements and Required Documents to Open a Bank Account as a Non-Resident

You will most likely have to meet eligibility criteria to open a non-resident account. This includes the number of days out of the year you plan on being in the country. For example, you will have to spend less than 183 days in Israel in a year to be eligible for a non-resident account. Anything more than 183 days will label you as a resident. You may also need to maintain a family residence, permanent home, workplace, economic interests, or personal ties abroad to be eligible for a non-resident account. To open your account, you will need:

  • passport;
  • a second piece of ID;
  • immigration papers;
  • social security number (for US expats);
  • cash or check to open the account;
  • second party if opening a joint account;
  • Note of Future Bank account (you should receive this at the airport upon arrival in Israel).
Bank Fees and Minimum Deposit

Bank fees in Israel include the following:

  • ATM fees for withdrawals—This amount may vary depending on how much you are withdrawing. There may also be a maximum to how much you can take out.
  • fees for withdrawing with a teller—You will be charged more than regular ATM fees when working with someone at the bank to withdraw your cash in person.
  • transaction fees—These apply to any transactions that happen within your account.
  • monthly account fee—This is payable even if you do not use your account or if there is minimal movement happening on your account.

Other significant fees may include the cost of a checkbook, exchange rates, fees for overdraft protection, monthly credit card fees, international transfer fees, regular transfer and wire fees, and a fee for depositing foreign currencies.

Some banks offer discounted rates to newcomers in Israel, so make sure you ask your bank about this. For example, the Bank of Jerusalem provides no-fee bank accounts in Israel for foreign resident accounts. In this case, ‘no-fee’ means waived management fees or no withdrawal fees for a limited period.

The minimum amount you will need to open your account initially is at least 100 ILS (28 USD).

Things to Know

Banks in Israel have two types of ATMs: one for transactions and one for information. If you need to withdraw money, you can only do so at the transactional ATM. At the other machine, you can check your balance, print your statement, get a new password, etc.

Best Banks in Israel

The top 5 banks in the country are:

  • Hapoalim—discounts for new immigrants offered; ATMs and branches across the country;
  • Leumi—non-resident accounts provided and there is the option to open your account online;
  • Discount Bank—account options for youth, soldiers, and other groups; offers discount deals to new clients;
  • Mizrahi Tefahot—flexible customer service with both telephone and online options; Israel’s leading mortgage lender;
  • First International—specializes in business accounts and premium accounts for high-net-worth clients.

Hapoalim and Leumi are the top 2 institutions in the country, controlling 60% of the market in Israel. For a full directory of other banks in Israel, click here.

International banks in Israel include the following:

  • HSBC
  • Barclays
  • Citibank

Online banks in Israel are a new thing. In fact, in September 2019, the Bank of Israel approved the country’s first new financial institution in four decades—a fully digital bank (with no physical institutions). The online bank is set to launch in 2021.

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What is the Tax System in Israel?

What is the tax system like in Israel? The tax system in Israel is levied on a personal basis, unlike before when it was on a territorial basis. Income tax is calculated on a sliding scale: the more you earn, the more you will be taxed. Taxes in Israel are one of the highest in the world at about 25% of average household income.

The desert country has tax incentives for new Jewish immigrants. This includes income, capital gains, and import tax benefits. There are also reduced tax rates for passive income (i.e., apartment rental and interest).

There are allowance points granted for certain people, which reduce the amount of tax payable. Each point is worth roughly 650 USD (approximately 2,261 ILS):

  • Israeli man—2.25 points
  • Israeli woman—2.75 points
  • minor (under 18)—1 point
  • child between the ages of 0–5—4.75 points for the father and 5.25 for a mother
  • discharged soldiers—2 or 1 points depending on length of time served
  • people who completed Sherut Leumi—2 or 1 points depending on the time served

Other people eligible for these credit points include single-parent families, new immigrants, teenagers, families with disabled children or a disabled partner who cannot work, students paying tuition, residents of border or development towns, people paying child support, etc.

The corporate income tax rate in the country is 23%. Resident companies are subject to taxes on worldwide income. They are considered a resident company if they are a business incorporated in Israel, or are managed and controlled in the Middle Eastern country.

The end of the tax year coincides with the end of the calendar year: December. Taxes are due April 30. When an online filing is required, the due date is May 31. You can file either a single assessment or a joint assessment if you are a married couple. The tax return is then processed by the Israel Tax Authority (ITA), and you must pay whatever is due. Conversely, if you are owed a tax refund, you must have an Israeli bank account to receive it. It can take up to three months to receive your refund.

Companies usually have five months after the end of the tax year to submit their returns. Extensions may be granted.

Taxpayers are not usually required to file personal tax returns if

  • their primary source of income is employment income, and it has been withheld;
  • the total income of each spouse does not exceed a certain amount.

When it comes to your taxes, it is recommended you hire either an accountant with experience working with expats or a destination services provider such as InterNations GO! With our Settling-In Services, we can assist you in registering with the ITA. If you are having trouble finding someone to help you with your taxes, we can arrange the professional services of accountants and financial advisors who speak your language. Contact us today to learn more.

Types of Taxes in Israel

Taxation in Israel includes

  • income tax
  • capital gains tax
  • value-added tax (17%)
  • land appreciation tax
  • purchase tax

There is no tax on estate or gifts in Israel.

What is the Income Tax in Israel?

Tax on salary in Israel for both residents and non-residents is between 10% to 47%. It is broken down as follows:

Avg Income Tax % Tax Bracket (ILS) Tax Bracket (USD)
10 1–75,720 0–21,654
14 75,721–108,600 21,654–31,057
20 108,601–174,360 31,057–49,863
31 174,361–242,400 49,863–69,320
35 242,401–504,360 69,321–144,234
47 504,361–649,560 144,235–187,758
50 Over 649,560 Over 185,758

Income tax is discounted directly off of an employee’s salary by the employer. On the 15th of every month, the company transfers the amount deducted to the ITA for the previous period. If the company is small with just a few employees, the organization is allowed to submit their returns every two months.

Israelis are subject to tax on their worldwide income, while non-residents are only subject to taxes on income earned in Israel. There are no local taxes on income in the country.

Taxes for Self-Employed People in Israel

Self-employed people in Israel are taxed at the same rate as employed workers, as outlined above. They are responsible for paying the ITA an advance on the 15th of every month. The ITA determines the advances owed based on the previous year’s returns.

Self-employed people are required to fill out Form 1301 and submit it to the ITA.

Residence Rules

If you are in Israel for at least 183 days in a year, you are considered a resident for tax purposes, or based on your “center of life” and ties in the country. This could be

  • permanent home (even if occupied by someone else temporarily);
  • place of residence of you or your family;
  • habitual place of business or permanent employment;
  • place where assets and investments are situated;
  • place of membership in organizations, institutions, and associations.

Expats who come to the work in the country for a limited period on a B/1 visa are not considered residents for tax purposes but are still liable to tax as non-residents.

Double Taxation Treaties

Israel has taxation treaties with more than 50 countries, which means nationals of those countries are not subject to pay double taxes. A list of these countries, along with the details of the agreement and rules, can be found on the Ministry of Finance website.

Do you want to relocate? If you have never moved abroad, the process will be overwhelming, and if you have, you know the burden that lies ahead. Whatever stage you are at, InterNations GO! can help you with a complete set of relocation services, such as home finding, school search, visa solutions, and even pet relocation. Our expert expat team is ready to get your relocation going, so why not jump-start your move abroad and contact us today? Best to start early!

Updated on: October 14, 2019
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