Ministry of Finance invites public comments on a draft law introducing a local minimum tax for multinationals under the OECD’s Pillar Two framework.

The Israeli Ministry of Finance has opened a public consultation on draft legislation to introduce a local minimum tax on multinational corporations, in line with the OECD’s Pillar Two global minimum tax framework on 19 October 2025.

The proposed tax regime is based on the Qualified Domestic Minimum Top-up Tax (QDMTT) mechanism, designed to ensure that multinational groups operating in Israel pay an effective minimum tax rate consistent with the OECD’s Base Erosion and Profit Shifting (BEPS) initiative.

In addition to drafting the memorandum, the Ministry of Finance is conducting an extensive internal review aimed at creating an incentive framework aligned with Pillar Two rules, focusing primarily on examining the Qualified Refundable Tax Credit (QRTC) mechanism. This is designed to help Israel retain competitive advantages and attract international investment, while complying with the new global standards and considering potential international developments in the coming months.

The inter-ministerial working group includes representatives from the Chief Economist Division, the Budget Department, the Israel Tax Authority, and the Israel Innovation Authority. The aim is to share the core principles of the developing incentive framework with the public as soon as possible, to advance this package alongside the QDMTT legislation.

The Ministry of Finance intends to publish the incentive framework outline no later than the submission of the legislative memorandum for approval by the Ministerial Committee on Legislation.

The distribution of the draft for public comments recognises that in the coming months, international decisions may influence whether to advance the legislation in its current form, including:

  • Ongoing discussions regarding the “Side by Side” mechanism, as announced in statements by G7 and OECD finance ministers;
  • The temporary validity of Pillar Two rules, particularly those concerning Safe Harbour provisions;
  • Discussions on developing additional substance-based qualifying incentive mechanisms, which form part of the global dialogue on establishing a fair and balanced international tax policy.

The Ministry of Finance will continue to act transparently, responsibly, and in cooperation with all professional stakeholders in government and the business sector, in order to ensure the effective implementation of Pillar Two rules in Israel, while enhancing the competitiveness of the local economy and supporting industrial and innovation development in the country.

Earlier, the Ministry of Finance published a draft legislation for a Domestic Top-Up Minimum Tax (the draft law) for public consultation on 5 October 2025.