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. The enforcement of QDMTT will eliminate the need for Israeli companies to pay extra taxes in foreign countries on income earned in Israel.
Pillar Two includes measures that result in the payment of a minimum effective tax of 15% on the total profits of the multinational corporation in each of the countries in which it operates.
Israel has opted not to implement the income inclusion rule (IIR) and the undertaxed payment/profit rule (UTPR) at this time. Instead, the consideration for their implementation will occur after the QDMTT has been established.
In 2021, Israel stated that it would join the digital economy taxation outline and the two-pillar programme within its framework. In accordance with the OECD rules, a country may choose the scope and manner of adopting Pillar Two mechanisms into its internal law, including partially.
Many countries worldwide began to fully or partially adopt the Pillar Two mechanism as early as 2024.
