I live in Dubai and own an apartment in Tel Aviv. Does the Israel UAE tax treaty change what I pay?

The Abraham Accords produced a working double tax treaty faster than most people expected. Israel and the United Arab Emirates signed on 31 May 2021, the treaty entered into force on 29 December 2021, and it has applied since 1 January 2022. It follows the OECD model, and on the Israeli side it covers income tax, company tax including tax on capital gains, and tax on gains under the Real Estate Taxation Law 5723-1963. That last item is the one owners misread.

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Detailed Answer

Covering a tax is not the same as removing it. On the OECD pattern the treaty allocates taxing rights, and income from immovable property, together with gains on its disposal, is allocated to the state where the property is situated. An apartment in Tel Aviv therefore stays inside the Israeli net whatever your residence. Rental income remains taxable in Israel, with the 10% flat track under Section 122 of the Income Tax Ordinance available to an individual who does not deduct expenses or depreciation, and a sale still attracts betterment tax at 25% on the real gain. Purchase tax is likewise untouched, and a non-resident buyer pays the higher band rates rather than the resident single home rates. Where the treaty does real work is on the movable side: dividends are limited to 15%, dropping to 5% for a corporate shareholder that has held at least 10% of the payer throughout the preceding 365 days and to nil for qualifying governmental and pension bodies, interest sits between nil and 10% depending on the recipient, and royalties are capped at 12% of the gross amount.

There is a further asymmetry that Gulf residents notice quickly. A double tax treaty prevents the same income being taxed twice by giving a credit in the residence state, but the United Arab Emirates levies no personal income tax, and its corporate tax, introduced in June 2023 at 9%, applies to businesses rather than to an individual's foreign rental income. So there is generally no second tax bill to relieve and no credit to claim. The Israeli tax is simply the tax. What the treaty does give you is certainty about residence, a basis for exchange of information between the two authorities, and access to the mutual agreement procedure where Israel and the UAE take different views of the same arrangement. Two practical consequences follow for an owner in Dubai. First, the treaty makes it worth confirming that you are in fact a treaty resident of the UAE, which normally means holding a UAE tax residency certificate rather than merely holding a residence visa. Second, since Israel taxes you as a non-resident, the mechanics of a sale, and in particular the withholding your buyer's lawyer must make on account of betterment tax, work exactly as they do for any other overseas seller, which our answer on the ishur nikui withholding certificate when selling Israeli property sets out step by step.

In Practice: The Israel UAE double tax treaty was signed 31 May 2021, entered into force 29 December 2021 and applies from 1 January 2022, covering Israeli income tax, company tax including capital gains, and tax on gains under the Real Estate Taxation Law 5723-1963. Dividends are capped at 15%, falling to 5% for a corporate holder of at least 10% held for 365 days, interest runs from nil to 10%, and royalties are capped at 12%. Israeli property income and gains stay taxable in Israel: rental under the 10% track in Section 122 of the Income Tax Ordinance, betterment tax at 25%, filed with the Israel Tax Authority within 30 days of the sale agreement. On a gain of NIS 1,500,000 that is NIS 375,000 of Israeli tax with no UAE credit available.

When to Consult a Lawyer

• You hold the Israeli property through a UAE free zone company. Treaty benefits depend on the entity qualifying as a resident of the UAE for treaty purposes, and a free zone vehicle taxed at nil is not automatically treated the same way as an ordinary taxpayer.
• You moved to Dubai from Israel and have not formally severed Israeli tax residency. The treaty tie breaker only helps once the factual position is documented, and until then the Israel Tax Authority may still treat your worldwide income as taxable here.
• You also draw dividends or interest from an Israeli company. This is where the treaty rates genuinely reduce the bill, but the reduced rate has to be claimed with the withholding agent in advance rather than reclaimed afterwards.

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Speak With an Israeli Attorney

We check whether you qualify for treaty benefits on the UAE side, apply the correct Israeli withholding to your rental income or sale, and deal with the Israel Tax Authority on residence questions before they become an assessment.

Contact us for a confidential initial consultation.