An employer is required to open a withholding tax file and withhold income tax from employment remuneration paid to employees, for work performed in Israel.
In contrast to salaried employees, self-employed persons must file an annual tax return and make their own tax payments.
Taxes of up to 50% are levied on most domestic Israeli expenses, unless the recipient holds confirmation from the Israeli Tax Authority allowing a lower rate.
Israeli banks must withhold tax, generally at rates of 25-31%, on remittances from Israel, unless the remittance is related to imported goods.
An exemption or reduction in tax withholding may be obtained for certain cases such as when a treaty applies or when the payments are for services that are rendered entirely abroad.
Failure to withhold will result in a denial of the relevant expense and possible penalties