Calculate investment returns after Israeli capital gains tax. Enter initial investment, annual return, holding years, and 25% default CGT to see gross and net portfolio value.
Enter your initial investment, annual return, holding years, and capital gains tax rate to see your projected portfolio value after Israeli CGT.
Net portfolio value after tax
--
Initial investment
--
Gross gain
--
Capital gains tax
--
Net gain after tax
--
Your breakdown
Updates live as you type
Item
Amount
How compound investment growth works before tax
This calculator uses annual compounding. Each year, the portfolio grows by the annual return rate. After the specified number of years, the gross portfolio value is calculated. The gain is the difference between the gross value and the initial investment. Israeli capital gains tax at the specified rate (default 25%) is then applied to this gain only. The initial investment is returned tax-free since it was made from after-tax money. For a 100,000 ILS investment at 8% annual return over 10 years, the gross value is approximately 215,892 ILS, the gain is 115,892 ILS, and the 25% tax is 28,973 ILS, leaving a net value of about 186,919 ILS.
Why holding period matters for Israeli investors
Israeli capital gains tax is only triggered at the point of sale. This means a buy-and-hold investor who never sells pays no CGT until exit. Over a long holding period, the compounding effect is maximized because the full pre-tax return reinvests each year. Comparing a 5-year hold versus a 10-year hold at the same annual return shows the power of tax deferral: in year 10, not only has the portfolio grown for an additional 5 years, but the deferred tax (which would have been paid in year 5) has also continued to grow. This tax-deferral benefit is one of the strongest arguments for long-term passive investing in Israel.
Limitations of this nominal return model
This calculator computes tax on the nominal (not inflation-adjusted) gain. Israeli law actually allows an inflation adjustment that reduces the taxable gain, so actual tax owed will typically be lower than shown if there has been meaningful inflation over the holding period. Use the capital gains calculator with the inflation adjustment field for a more accurate after-tax figure. This calculator also does not model dividends received during the holding period, which are taxed annually at 25% as they are received, nor does it account for fund management fees, transaction costs, or the specific rules for tax-exempt provident fund investments.
Frequently asked questions
How is capital gains tax applied to investment returns in Israel?
For individual investors in publicly traded securities, Israeli capital gains tax is 25% on the real (inflation-adjusted) gain. In practice, for a simple nominal projection without inflation adjustment, the tax is applied to the full nominal gain (sale price minus purchase price). The gain is the portfolio value at exit minus the initial investment. Tax at 25% is applied to this gain, and the net portfolio value is the gross value minus the tax. For a more accurate calculation, use the capital gains calculator on this site to input an inflation adjustment, which will reduce the taxable gain and therefore the tax owed.
When do I pay capital gains tax on an investment in Israel?
Capital gains tax in Israel is due at the time of the taxable event, which is when you sell or dispose of the investment. There is no annual mark-to-market tax on unrealised gains for most individual investors holding listed securities. The tax is triggered by: selling shares or ETFs, redeeming mutual fund units, closing a provident fund (Keren Hishtalmut or Gemel) outside the tax-exempt window, or receiving certain corporate distributions. This means a buy-and-hold investor can defer the tax liability indefinitely by simply not selling, allowing the full compound return to accumulate tax-deferred until exit.
Are mutual fund (Gemel) returns taxed the same way in Israel?
Israeli mutual funds (Qupon/Gemel type) and ETFs listed on the Tel Aviv Stock Exchange (TASE) are subject to the same 25% capital gains tax treatment for individual investors. Some funds are quoted net of a management fee (Dmei Nihul) deducted annually. The tax on gains is paid at redemption. Certain tax-exempt fund tracks (Maslul Patur) exist within provident funds for specific eligible populations. In general, the same 25% rate applies across most listed investment vehicles, though the inflation adjustment rules may differ slightly for certain structured products.
What is the difference between the nominal and real return for Israeli investors?
The nominal return is the total percentage gain in shekel terms without adjusting for inflation. The real return adjusts for the erosion of purchasing power due to Israeli CPI inflation. Since Israel adjusts capital gains tax on the real gain, a high-inflation environment effectively reduces the tax bill compared to a no-inflation scenario. For example, if you earned 60% nominal return over 5 years but Israeli CPI rose 20% over the same period, the taxable real gain is only 40% of your purchase price, not 60%. The inflation adjustment is therefore always beneficial for Israeli investors holding assets through inflationary periods.