This draft legislation outlines the framework for establishing a local minimum tax on multinational corporations, ensuring alignment with international agreements to implement a global minimum tax.
Israel’s Ministry of Finance has taken a significant step toward integrating global tax standards by publishing a legal memorandum for public review on 19 October 2025.
This draft legislation outlines the framework for establishing a local minimum tax on multinational corporations, ensuring alignment with international agreements to implement a global minimum tax.
The proposed tax framework is specifically designed to implement the Qualified Domestic Minimum Top-up Tax (QDMTT) mechanism. This mechanism is a key component of the OECD’s Pillar 2 reform, which addresses the challenges arising from the digital economy. By adopting the QDMTT, Israel intends to guarantee that taxable income generated within the country meets the minimum tax thresholds established under the OECD’s BEPS project.
This follows the finance ministry’s publication of a draft law on a Domestic Top-Up Minimum Tax (the draft law) for public consultation on 5 October 2025.
The Minister of Finance announced in July 2024 that the implementation of the QDMTT mechanism is scheduled to begin in 2026.
Additionally, the government is working in parallel on designing a package of incentives. The goal of this associated initiative is to allow the State of Israel to preserve its competitive advantages and continue attracting international investments, despite the new “rules of the game” being established globally. This effort involves examining various supportive frameworks, such as the Qualified Refundable Tax Credit (QRTC) mechanism.
It is recognised that the final form of the legal memorandum may change. The Ministry is aware that ongoing international decisions in the coming months could influence the legislation.
The Ministry of Finance has committed to operating transparently, collaborating closely with both government professional entities and the business sector. This approach aims to ensure the optimal implementation of the Pillar 2 rules in Israel while effectively promoting the continued development of local industry, innovation, and economic competitiveness.
Earlier, Israel’s Ministry of Finance announced its initial plan to implement the qualified domestic minimum top-up tax (QDMTT) in 2026, as part of the OECD Pillar Two international tax reform.
