Israeli Finance Minister Bezalel Smotrich announced on Sunday that Israel will begin implementing the Qualified Domestic Minimum Top-up Tax for multinational corporations in 2026 as part of a tax reform. The move brings Israel in line with Organisation for Economic Co-operation and Development (OECD) tax reforms.
The reform will impact multinational corporations operating in Israel such as Microsoft, Intel, Google, Apple and Amazon.
“I decided today on Israel’s accession to the implementation of the international standard that was formed regarding the taxation of multinational corporations, which will help preserve the attractiveness of the Israeli tax regime in the new global taxation reality, and will ensure the prevention of the leakage of taxes from Israel due to local activities,” Smotrich tweeted.
“Compliance with advanced international standards is a necessary condition for creating a free and global market economy that leads to growth and improving our quality of life.”
The reform also prevents Israeli companies from paying taxes abroad for income created in Israel.
The reform is part of the OECD’s Base Erosion and Profit Shifting (BEPS) initiative, aimed at addressing tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations. Launched in 2013, the BEPS project seeks to ensure that profits are taxed where economic activities generating the profits are performed and where value is created.
More than 135 countries and jurisdictions are collaborating to implement the reforms.
This marks a substantial shift for Israel, as multinational corporations often benefit from very low tax rates, sometimes as low as 6%, under laws encouraging capital investment encouragement laws.
For example, the US semiconductor company Intel is building a $25 billion chip manufacturing plant in the southern Israeli town of Kiryat Gat. The factory, the largest foreign investment in Israel, is due to open in 2027. Under the deal finalized in June 2023, Intel was to pay a 7.5% tax rate.
Under the terms of the tax reform, Intel would pay a 15% tax rate.
