Employer Tax Contributions

Tax Type	Rate	Base
National Insurance (Bituah Leumi)	4.51% (up to ILS 7,522/month); 7.6% (above ILS 7,522 up to ILS 50,695/month)	Employee's gross salary
Health Tax	0%	Employee's gross salary (no employer contribution)
Income Tax Withholding	Progressive rates	Employee's gross income

Filing & Compliance

• Monthly payroll reports (Form 102) and payments are due by the 15th of the following month.
• Annual consolidated report (Form 126) for income and tax details is typically due by April 30th of the following year.
• Employers must provide employees with an annual summary (Form 106) by March 1st of the following year.

In Israel, employee tax deductions encompass various areas, including income tax, National Insurance, and health tax, impacting net pay. Let's explore the key aspects of these deductions.

Income Tax

Income tax in Israel operates on a progressive system, meaning higher earners face higher tax rates. As of 2025, the tax brackets and rates are as follows:

• Up to 7,010 ILS: 10%
• 7,011 - 10,060 ILS: 14%
• 10,061 - 16,150 ILS: 20%
• 16,151 - 22,870 ILS: 31%
• 22,871 - 54,300 ILS: 35%
• 54,301 - 75,480 ILS: 47%
• Above 75,481 ILS: 50%

For example, an employee earning 20,000 ILS per month would fall into the 31% bracket. Their income tax calculation would involve paying different rates for each portion of their income, falling within various brackets, making it progressively higher.

National Insurance

National Insurance contributions fund social security benefits like healthcare, pensions, and unemployment support. Both employers and employees contribute.

• Up to 7,522 ILS (60% of average wage): Employee contributes 4.27%, employer contributes 4.51%.
• Above 7,522 ILS (up to 50,695 ILS): Employee contributes 12.16%, employer contributes 7.6%.

Income above 50,695 ILS is not subject to National Insurance contributions.

Health Tax

Health tax supports the national healthcare system and is deducted solely from the employee's salary.

• Up to 7,522 ILS: 3.23%
• Above 7,522 ILS: 5.17%

There is no employer contribution for health tax.

Other Deductions and Considerations

• Pension Funds: Employers typically contribute to employee pension funds. The exact amounts vary but can significantly reduce taxable income.

• Education Funds: Employees can contribute up to 15,712 ILS monthly to education funds, which offer tax advantages for professional development and educational pursuits.

• Foreign Workers: Deductions for foreign workers follow specific regulations, particularly concerning health insurance and housing costs, sometimes capped as a percentage of their salary.

• Travel and Subsistence: Employees can deduct work-related travel and subsistence expenses incurred outside their usual work location, adhering to specific guidelines.

It is important to note that these rates and regulations can change. Consulting with a tax professional or using updated payroll software ensures accurate and compliant deductions.