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A capital gain is the profit created on the sale of equipment that is not trading stock of the business, so, for example, if your business is a law office and you sell a computer at a profit, the profit is a capital gain. On the other hand, if you are the owner of a store that sells computers, the sale of these computers is normal income and not a capital gain.

Types of Capital Gains

In calculating the profit, a distinction is made between inflationary profit which reflects the increase in value in terms of inflation from the date of purchase until it is sold.
The real profit is that reflected by the profit in excess of the cost of the asset sold, after it has been adjusted for inflation.
The rate of tax: From 1.1.94, there is no tax obligation on inflationary capital gains, the real capital gain is subject to tax at the normal rate; from 1. 2003 the tax rate for the real capital gain is 25%.


The law makes the payment of an advance on income tax compulsory on a capital gain within 30 days of the date on which the asset is sold.

Spreading the Capital Gains

The Law allows you to spread the capital gain over 4 years, ending in the year of the sale. This relief is significant if in the 3 years preceding the sale, you did not have a taxable income or if you paid tax at a low rate.

Capital Gains of an Overseas Resident in Israel

If you are resident overseas and sell an asset in Israel or, in the case of a transaction conducted outside Israel, you sell an asset that is located in Israel, you will be liable for capital gains tax on this income.

Setting Off a Capital Gain

A real capital gain may be offset against a business loss in the year in which the gain was created, or against a business loss in previous years. Similarly, you may offset a capital gain against a capital loss.

Land Improvement

The principles of taxation of real estate sales, in those instances in which the sale is taxable, are very similar to that mentioned above in connection with capital gains.




Mrs. Anat Livne, will attend to you (in English) on phone No. +972 3 546 88 88

we speak English    Nous parlons Francais

Hanner - Ofer, Israel Law Firm, 242nd. Ben-Yehuda St., Tel-Aviv 63501, Tel: 972 3 546 88 88,  Fax: 972 3 546 75 36,  Skype: "hanner"

Founded in 1987

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