Rent from a property in Israel is income produced in Israel under the source rules of the Income Tax Ordinance, so it is taxable here even where the landlord is not an Israeli resident. Which tax track applies, whether the exemption, the 10 percent track under section 122, or the ordinary track, is set out in the article on Israeli property tax for non-residents linked at the foot of this page, together with the conditions of the exemption and the ceiling.

This page deals with what happens around that choice. What is withheld from each payment, what is required to move the money out of Israel, and when a filing obligation arises.

Two notes before the substance. The assessing officer, in Hebrew pekid shuma, is the Tax Authority official to whom applications of the kind described here are made. And the legislation, circulars and forms discussed below exist in Hebrew only; the English wording given for them here is our rendering, not an official text. The same applies to the treaty provisions described further down, which are rendered here from their Hebrew texts.

Withholding on rent

The Income Tax Regulations (Withholding from Payment of Rent), 5758-1998, made under sections 164 and 243 of the Ordinance, provide that a tenant paying rent to a landlord shall withhold tax at 35 percent from that payment. A “tenant” is defined in the regulations as a person paying rent on his own account, on his own behalf or on the account of another. The term “foreign resident” does not appear in the regulations at all.

Alongside them stands the Income Tax Order (Determination of Rent as Income for Withholding Purposes), 5758-1998, which provides that rent shall be income for the purposes of section 164. The definition in the Order is narrower than it first appears. Rent means a payment for the lease of immovable property, as defined in the Land Law, 5729-1969, that may be claimed as an expense in the production of income, including sums that constitute a reimbursement of the landlord’s expenses in respect of the letting.

A private tenant of a dwelling is outside the Order

Someone renting an apartment to live in cannot claim the rent as an expense in the production of income, so the payment is not rent for the purposes of the Order. Income Tax Circular 5/98 says so expressly: a payment for a residential dwelling made by an individual tenant for private purposes is not treated as rent, whether the landlord is liable to tax or exempt. In the Sla’im Eitanim case the District Court held that the definition is examined by reference to the character of the payment and the identity of the payer, and that rent paid in a private capacity falls outside the Order.

The practical test is therefore whether the tenant may claim the rent as an expense. A business tenant must withhold. A private tenant of an apartment he lives in need not.

The obligation is the tenant’s

The duty to withhold under sections 164 and 170 falls on the payer, meaning the tenant, and the consequences of failing to withhold fall on him. From the landlord’s side that is a reason to deal with the point in the lease in advance, including who bears the cost if a withholding assessment is issued against the tenant.

How section 170 fits

Section 170 of the Ordinance applies to taxable income paid to a foreign resident that is not income from which tax was deducted under sections 161 and 164. The rate under it is 25 agorot in the shekel for an individual, an agora being one hundredth of a shekel, so 25 percent; the rate imposed under sections 126 and 127 for a body corporate; or another rate set by the assessing officer in a written notice. Where tax was in fact withheld from the rent under section 164 and the regulations made under it, section 170 does not apply.

In the Asmi Oz case the court set out the order of examination. First the withholding duty under section 164 and the regulations or orders made under it; then the recipient’s residence and the application of section 170; and finally any exemption or relief under domestic law or under a treaty.

A payment from which no tax was withheld does not fall outside the regime, and it may be examined under section 170. That has particular force where the landlord is a foreign resident and the tenant is private: the very exclusion from the Order leaves the question open under section 170, which applies to any person paying a foreign resident. No direct decision on that question was found, which is a reason to raise it with the assessing officer in advance rather than after the first payment.

Reducing the rate

Regulation 4 of the 1998 regulations empowers the assessing officer to reduce the rate of withholding. In the Eliyahu 1959 case, where the tenant was a company, the court noted that the appellant had not applied for a reduction although it could have approached the assessing officer. In the Shlomo Saad case the court considered a 35 percent withholding duty on rent paid for employee accommodation, that is a payment made by a business for someone else’s occupation. The application is best made before payments begin.

Moving the money out of Israel

Before an Israeli bank will execute a transfer to a foreign resident it will ordinarily require either a certificate from the assessing officer or an appropriate declaration. There are two routes.

Rent is not among the payment types listed in form 2513/2, so the bank declaration route is not generally suitable for a foreign resident landlord, and the practical course is an application to the assessing officer. It is worth arranging before the first payment rather than when the first transfer is refused.

Filing and refunds

The extent of the obligation depends on the track and on whether tax was withheld at source. According to the Tax Authority guide, a foreign resident with rental income in Israel is exempt from filing a return if tax was withheld from the income. The exemption is conditional on tax having actually been withheld. Someone from whom nothing was withheld does not come within it, and has to establish what filing obligation applies to him.

A person paying under section 122 who has no income tax file pays through form 3302 and, on the conditions and up to the ceiling prescribed, is relieved of filing an annual return. The conditions and the ceiling for the relevant tax year should be checked, including whether they apply to a person who is not an Israeli resident. Anyone outside the beneficial track files an annual return in any event.

The refund. Where 35 percent was withheld but the liability is lower, whether under section 122 or because the income is exempt, recovering the difference requires a return to be filed. In many cases arranging a reduction in advance under regulation 4 is better than withholding at the full rate and reclaiming afterwards. Either way the certificates of tax deducted, issued by the tenant, are needed.

In Execution Instruction 5/2026 the Tax Authority announced an online system for reporting and paying tax on income from letting property, including the 10 percent track under section 122. The instruction does not address foreign residents.

The position under a treaty

The immovable property article in a treaty is built differently from the dividend, interest and royalty articles. In the OECD model, article 6 provides that income derived by a resident of one state from immovable property situated in the other state may be taxed in that other state, and article 6(3) applies that expressly to letting. The article carries no rate cap, so a treaty does not generally reduce the Israeli tax.

The wording is not uniform, but the difference goes mainly to the taxing right of the state of residence. Under the treaty with the United Kingdom, income from immovable property may be taxed in the country in which the property is situated. Under the treaty with France, the income is taxable only in the contracting state in which the immovable property is situated, so for an apartment in Israel the treaty denies the French taxing right. In neither case is the Israeli tax reduced. The applicable treaty has to be checked.

On form A/114, which appears in the Tax Authority’s Hebrew forms index as א/114, a foreign resident seeking to rely on a treaty states the type of income. The categories named are dividends, interest and royalties, alongside a category of “other”. Rent is not a named category, so the income has to be described expressly.

What to keep

Further reading

Sources: Income Tax Ordinance [New Version], sections 122, 126, 127, 161, 164, 170 and 243; Income Tax Regulations (Withholding from Payment of Rent), 5758-1998; Income Tax Order (Determination of Rent as Income for Withholding Purposes), 5758-1998; Income Tax Circular 5/98, 17 March 1998; Execution Instruction 5/2026; Tax Authority forms 2513, 2513/2, 3302 and A/114; Israel United Kingdom double taxation convention; Israel France double taxation convention; OECD Model Tax Convention, article 6; Sla’im Eitanim v. Assessing Officer Petah Tikva; Asmi Oz; Eliyahu 1959; Shlomo Saad.

Last updated: 6 September 2026

This page is a general overview only. It is not legal or tax advice and should not be relied upon in making decisions. Rates and ceilings change from time to time, and the outcome depends on the facts of the case and on the applicable treaty.