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Israel Dividends

Last updated: 03-11-2006

Treaty

Israel

Article

Dividends

Signed

July 2, 1973

In Force

 

Article 11  Dividends
     1. Dividends paid by a company which is a resident of one of the States to a resident of the other State may be taxed in that other State.
     2. However, such dividends may be taxed in the State of which the company paying the dividends is a resident, and according to the laws of that State, but if the recipient is the beneficial owner of the dividends, the tax so charged shall not exceed:
a) with respect to dividends paid by a company which is a resident of one of the States to a company the capital of which is wholly or partly divided into shares and which is a resident of the other State and holds directly at least 25 per cent of the capital of the company paying the dividends:
(i) 10 percent of the gross amount of the dividends where the dividends are paid out of profits which, by virtue of provisions in Israeli law for the encouragement of investment in Israel, are exempted from tax or subject to tax at a rate that is lower than the standard rate levied on the profits of a company resident in Israel;
(ii) 5 per cent of the gross amount of the dividends in other cases;
b) 15 per cent of the gross amount of the dividends in all other cases.
     3. The competent authorities of the States shall by mutual agreement settle the mode of application of paragraph 2.
     4. The provisions of paragraph 2 shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.
     5. The term "dividends" as used in this Article means income from shares, "jouissance" shares or "jouissance" rights, mining shares, founders' shares or other rights participating in profits as well as income from debt-claims participating in profits and income from other corporate rights assimilated to income from shares by the taxation law of the State of which the company making the distribution is a resident.
     6. The provisions of paragraphs 1 and 2 shall not apply if the recipient of the dividends, being a resident of one of the States, has in the other State, of which the company paying the dividends is a resident, a permanent establishment with which the holding by virtue of which the dividends are paid is effectively connected. In such a case, the provisions of Article 8 shall apply.
     7. Where a company which is a resident of one of the States derives profits or income from the other State, that other State may not impose any tax on the dividends paid by the company to persons who are not residents of that other State, or subject the company's undistributed profits to a tax on undistributed profits, even if the dividends paid on the undistributed profits consist wholly or partly of profits or income arising in such other State.

 The above information is the wording of the article dealing with the withholding tax on dividends of the tax treaty between The Netherlands and Israel.  Please note that the ultimate withholding tax rate may differ from the treaty rate, for instance as consequence of domestic anti-abuse legislation, provisions of the treaty protocol, etc. Before you use this information we therefore strongly recommend that you consult us to determine the accurate withholding tax rate for your specific situation. If you require our follow up, you can contact us via e-mail or call us at our offices: Ph. + 31 (10) 2010466.