The Distinction
For CPI-linked instruments, Israel taxes the real interest (above inflation) at 25% and the inflationary component at 15%. For non-linked instruments, the full nominal interest is taxed at 25%. This creates a tax advantage for CPI-linked instruments during periods of moderate inflation.
Example
₪100,000 in a CPI-linked bond earning 3% real + 3% CPI linkage.
Real interest: ₪3,000 × 25% = ₪750
Linkage: ₪3,000 × 15% = ₪450
Total tax: ₪1,200 (20% effective)
Same return in non-linked deposit: ₪6,000 × 25% = ₪1,500 (25% effective)
CPI-linked saves ₪300/year on the same return.
Important Note: The information on this website is for general informational purposes only and does not constitute professional tax advice. Consult a qualified tax advisor before making financial decisions.