In brief
The tax treaty between Israel and Romania, signed on 15 June 1997 and applicable from 1 January 1999, gives Romania the first right to tax rent and gains from the sale of property located there. An Israeli resident reports the same income in Israel as well and receives a credit for the Romanian tax, up to the amount of the Israeli tax. Anyone who chooses the 15% track in Israel for rent from abroad forgoes this credit.
Key takeaways
- 1The treaty does not exempt you from tax in Israel. It determines who taxes first and prevents double payment on the same income.
- 2Rent and gains on sale are taxed first in Romania, and Israel grants a credit up to the amount of the Israeli tax on the same income.
- 3On the 15% track (Section 122A of the Income Tax Ordinance) there is no credit, so the Romanian tax becomes a final cost.
- 4From 1 January 2026 the Romanian tax on dividends is 16%, and the treaty limits it to 15% against an Israeli certificate of residence.
- 5The treaty does not apply to local property tax in Romania or to social security, which has a separate agreement.
One of the common assumptions among Israeli investors is that "there is a treaty, so you do not pay in Israel". This is a mistake, and sometimes it costs money. A tax treaty does not erase liability. It sets an order: which country taxes first, and how the other country takes into account what has already been paid.
This guide explains what the treaty between Israel and Romania provides regarding real estate, how the credit works in practice, and which of your decisions in Israel may cancel its benefit. We have separate guides on calculating Romanian tax on rent and on sales.
Is there a tax treaty between Israel and Romania, and from when does it apply?
Yes. The treaty for the avoidance of double taxation was signed on 15 June 1997 and applies from 1 January 1999. It applies to residents of both countries, individuals and companies. The text can be found in the Romanian legislation database, under "Convenție 15/06/1997", and on the website of the Israel Tax Authority.
Without a treaty, an Israeli resident with a property in Romania could have paid full tax in both countries on the same rent. The treaty arranges this: one country taxes first, and the other grants a credit.
Rent and gains on sale are taxed first in Romania, and Israel grants a credit up to the amount of the Israeli tax on the same income.
Who taxes rent and the sale of a property in Romania?
Romania, the country in which the property is located, taxes first. Israel taxes its residents on their worldwide income, so the income is reported there as well, with a credit for the Romanian tax.
| Type of income | Tax in Romania (as of October 2026) | What happens in Israel |
|---|---|---|
| Rent from a property | 10% after a flat deduction of 20% | Reporting, and a choice between the 15% track without a credit and the marginal tax track with a credit |
| Sale by an individual, held up to 3 years | 3% of the transaction value | Reporting of the capital gain and a credit for the Romanian tax, up to the amount of the Israeli tax |
| Sale by an individual, held more than 3 years | 1% of the transaction value | As above |
The credit rule is the same in all rows: Israel allows the tax paid in Romania to be offset against the Israeli tax, but not more than the Israeli tax on the same income. If the Israeli tax is higher than the Romanian tax, you pay the difference in Israel. If it is lower, the excess paid in Romania is not refunded.
On a sale the gap between the systems is especially marked: in Romania the tax is calculated as a percentage of the transaction value, while in Israel the capital gain is reported. The sale should therefore be planned in advance, with a tax adviser who knows both systems.
Why may the 15% track in Israel cancel the benefit of the treaty?
Because on this track there is no credit for foreign tax. For rent from a property abroad, the Income Tax Ordinance gives an Israeli resident two options:
| 15% track (Section 122A) | Marginal tax track | |
|---|---|---|
| Tax rate | 15% of the rent | According to personal tax brackets |
| Deduction of expenses | Depreciation only | All permitted expenses |
| Credit for Romanian tax | None | Yes, under the treaty |
| Usually suitable for | A high tax bracket and low expenses | A low tax bracket, or high expenses |
Anyone who chooses the 15% track pays the Romanian tax and, in addition, 15% in Israel, without offsetting one against the other. The treaty exists, but on this track it does not help. The decision must be made anew every year, according to that year's figures.
What does the treaty provide regarding dividends, interest and royalties from a Romanian company?
This is relevant to anyone who holds properties through a Romanian company (SRL, a limited liability company) and draws profits from it. According to PwC Tax Summaries, from 1 January 2026 the Romanian tax on dividends rose to 16%, and it can be reduced under a tax treaty. The maximum rates in the treaty with Israel:
- Dividends: 15%.
- Interest: 10%, and 5% in certain cases of sale of equipment on credit.
- Royalties: 10%.
For the Romanian company to withhold at source at the treaty rate, it usually needs a certificate of tax residence from the Israel Tax Authority. Without such a certificate, the full Romanian rate is withheld. The certificate should be requested before payment, not after.
What does the treaty not do?
- It does not exempt you from tax in Israel. It prevents double taxation; it does not cancel liability.
- It does not replace reporting. An Israeli resident reports the rent and the sale in Israel even when tax has been paid in Romania.
- It does not apply to local taxes. The annual property tax paid to the local authority in Romania is a separate matter.
- It does not deal with social security. For that there is a separate agreement between Israel and Romania, which according to the National Insurance Institute has been in force since 2013.
How to benefit from the treaty in practice: an action list
- Keep every confirmation of tax payment in Romania. Without confirmation, there will be no credit in Israel.
- Choose the track in Israel every year, according to that year's figures, together with a tax adviser.
- Request an Israeli certificate of residence before a dividend or interest is received from Romania.
- Report on time in both countries. In Romania the annual return is filed with ANAF, the Romanian tax authority, by 25 May.
- Plan the sale in advance, because that is where the gap between the two systems is greatest.
Before signing: why to think about the treaty already at the purchase stage
Decisions such as purchasing in a private name or through a company, and in whose name the property is registered, are difficult to change after the transaction has closed, and they determine which treaty provisions will apply to you. Together with Israeli buyers, even before the preliminary contract, we prepare the list of questions for a tax adviser who knows the law in both countries. Reporting and payment in Romania are made to ANAF, usually through a locally licensed accountant or tax adviser.
This article is general information, current as of October 2026, and is not legal or tax advice. Application of the treaty depends on your personal circumstances and on the current law in both countries. Before any decision, it is advisable to consult a tax adviser versed in Israeli and Romanian law.
Frequently asked questions
Is there a tax treaty between Israel and Romania?
Yes. The treaty for the avoidance of double taxation was signed on 15 June 1997 and applies from 1 January 1999, to individuals and companies resident in both countries.
Where is tax paid on rent from a property in Romania?
First in Romania, where the property is located, and then it is reported in Israel. On the marginal tax track in Israel you receive a credit for the Romanian tax. On the 15% track you do not receive a credit.
Does the treaty exempt me from tax in Israel?
No. It gives a credit for the tax paid in Romania, up to the amount of the Israeli tax on the same income. If the Israeli tax is higher, you pay the difference in Israel.
How much tax is withheld on a dividend from a Romanian company to an Israeli resident?
The Romanian rate in 2026 is 16%, and the treaty limits it to 15%, provided that the paying company receives an Israeli certificate of tax residence.
What happens on the sale of a property in Romania?
In Romania an individual pays 3% of the transaction value if the property was held for up to three years, and 1% after three years. In Israel the capital gain is reported and a credit is received for the Romanian tax, up to the amount of the Israeli tax.
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The information in this guide is general in nature and does not constitute legal or tax advice on any specific transaction. Every transaction is assessed on its own facts.