Israeli Investors: USA Tech & Investment Guide
Tax treaty benefits, tech investment, and startup ecosystem access for Israeli nationals
Investment Overview for Israeli Nationals
Dividend Withholding
Interest Withholding
Capital Gains Tax
Visa Available
The Israel-USA Investment Connection
Israel and the United States have deep economic ties, particularly in technology. Israeli investors are uniquely positioned in the US market:
Tech Ecosystem Links
- Many Israeli startups have US HQ
- Strong VC relationships (US-Israel)
- NASDAQ is primary listing venue
- Silicon Valley-Tel Aviv corridor
Investment Advantages
- E-2 treaty investor visa
- Strong banking relationships
- No capital controls
- Bilateral investment treaty
Community & Access
- Large Israeli communities (LA, NY, SF)
- Hebrew-speaking professionals
- Israeli networks in US tech
- Strong legal/accounting support
US-Israel Tax Treaty
Withholding Rate Benefits
| Income Type | Standard Rate | Treaty Rate (Israel) | Savings |
|---|---|---|---|
| Dividends (portfolio) | 30% | 25% | 5% |
| Dividends (10%+ ownership) | 30% | 12.5% | 17.5% |
| Interest | 30% | 17.5% | 12.5% |
| Royalties (IP) | 30% | 15% | 15% |
| Capital gains (stocks) | 0% | 0% | N/A |
Israeli Tax on US Income
Israeli residents must report worldwide income. US investment income treatment:
| Income Type | Israel Tax Rate | Foreign Tax Credit |
|---|---|---|
| US Dividends | 25-30% | Credit for US withholding |
| US Capital Gains | 25% | N/A (not taxed in US) |
| US Real Estate Gains | 25% | Credit for FIRPTA |
| US Interest | 25% | Credit for US withholding |
Tech and Startup Investment
Israeli Tech in US Markets
Israel has the highest number of NASDAQ-listed companies outside the US. Many opportunities for Israeli investors:
Public Market Access
- 100+ Israeli companies on NASDAQ
- Cybersecurity leaders (CrowdStrike alumni)
- Enterprise software companies
- Semiconductor and chip companies
Private Market Access
- Israeli-founded US startups
- Cross-border venture funds
- Angel investing networks
- Secondary market opportunities
Direct Startup Investment
Investment Instruments
- SAFE agreements (most common)
- Convertible notes
- Preferred stock (priced rounds)
- Secondary purchases
Accredited Investor Status
- $200K+ income (or $300K joint)
- OR $1M+ net worth
- Required for most private placements
- Israeli wealth counts toward threshold
Common Structures
- Direct investment (personal)
- Delaware LP/LLC holding
- Israeli company investing in US
- Through AngelList or syndicates
Venture Capital Investment
US VC Fund Investment
Israeli investors can access US venture funds as Limited Partners:
Fund Types
- Institutional VC funds ($1M+ minimum)
- Rolling funds (lower minimums)
- AngelList syndicates ($1K+)
- Fund of funds structures
Israeli-US Focused Funds
- Funds with Israeli GP teams
- Cross-border specialists
- Cybersecurity-focused funds
- Enterprise software specialists
Tax Considerations for VC
| Income Type | US Treatment | Israel Treatment |
|---|---|---|
| Carried interest | Capital gains (if qualified) | 25% capital gains |
| Fund distributions (gains) | Pass-through, varies | 25% on gains |
| Fund management fees | Ordinary income | Ordinary income |
| ECI (effectively connected) | May require US filing | Credit for US tax |
Public Market Investment
Brokerage Options
US Brokers Accepting Israelis
- Interactive Brokers (preferred)
- Charles Schwab International
- Firstrade
- Direct US market access
Israeli Brokers with US Access
- Bank Leumi trading
- Bank Hapoalim trading
- IBI Investment House
- ILS settlement, higher fees
US Real Estate Investment
Popular Markets for Israeli Buyers
New York / New Jersey
- Large Israeli community
- Brooklyn, Manhattan
- Commercial opportunities
- Strong appreciation
Los Angeles
- Second largest Israeli community
- Entertainment industry connections
- Tech hub proximity
- Vacation and investment
Florida
- No state income tax
- Strong rental markets
- Miami, Boca Raton popular
- Vacation home potential
FIRPTA and Real Estate Tax
Israeli investors face US tax on real estate income and gains:
| Transaction | US Tax Treatment | Israel Credit |
|---|---|---|
| Rental income | 30% withholding or net election | Credit for US tax |
| Sale (FIRPTA) | 15% withholding on gross | Credit for US tax |
| LLC ownership | Pass-through | Credit for US tax |
Capital Transfer
Moving Money from Israel to USA
Israel has no capital controls. Moving money to the US is straightforward:
Wire Transfer Methods
- Bank wire (SWIFT)
- Wise (TransferWise)
- Payoneer
- Interactive Brokers forex
Cost Comparison
- Israeli bank wire: 1-2% spread
- Wise: 0.5-0.8% total
- IB forex: 0.2-0.5%
- Always compare rates
Reporting Requirements
To Israel (ITA)
- Report foreign accounts over $190K
- Annual Form 150
- Report foreign income
- CRS automatic reporting applies
To USA (if applicable)
- FBAR if US accounts over $10K
- Form 8938 for US persons
- Generally not applicable to Israeli residents
- Dual citizens: special rules apply
US Entity Formation
When to Form US Entity
Recommended For
- US real estate (liability protection)
- Operating US business
- E-2 visa applications
- Joint ventures with US partners
Usually Not Needed
- Stock portfolio investing
- Small angel investments
- Passive LP positions
- Short-term holdings
Entity Type Selection
| Entity Type | Best For | Israeli Tax Notes |
|---|---|---|
| Single-member LLC | Real estate holding | Pass-through, report on Israeli return |
| Multi-member LLC | Partnerships, joint ventures | Pass-through per membership % |
| Delaware C-Corp | Tech startup, VC-backed | CFC rules may apply |
Visa Options
E-2 Treaty Investor Visa
Israel is an E-2 treaty country, enabling investor visas:
Requirements
- Substantial investment ($100K+ typical)
- Active business (not passive)
- Direct and develop enterprise
- Israeli nationality required
Common Businesses
- Tech startups with US operations
- Consulting firms
- Import/export businesses
- Franchise operations
Other Visa Paths
| Visa Type | Best For | Investment Link |
|---|---|---|
| B-1/B-2 | Short business visits | Can explore, but not work |
| L-1 | Intracompany transfer | Israeli company expanding to US |
| O-1 | Extraordinary ability | Tech founders with achievements |
| EB-5 | Permanent residence | $800K-$1.05M investment |
Frequently Asked Questions
Do I need to pay tax twice on US income?
No, the tax treaty prevents double taxation. Israel provides credit for US taxes paid. However, if Israeli tax rate is higher than US rate, you pay the difference to Israel. Net effect is paying the higher of the two rates, not both.
Can I invest in US startups directly?
Yes, if you qualify as an accredited investor ($200K income or $1M net worth). SAFE agreements and convertible notes are common. Many Israeli angels invest directly in US startups. No special restrictions beyond standard securities laws.
What about the Olim tax exemption?
New immigrants (Olim) and returning residents (Toshavim Chozrim) have 10-year exemption on foreign source income and capital gains. This includes US investment income. If you qualify, US investments are effectively tax-free in Israel during this period.
Should I hold US stocks through Israeli or US broker?
US brokers (Interactive Brokers) offer lower fees and better execution. Israeli brokers offer ILS settlement convenience. For portfolios over $50K, US brokers typically save meaningful money. For smaller amounts, Israeli brokers may be more convenient.
How do I structure US real estate for Israeli tax?
Common structures include: Single-member LLC (for liability protection, pass-through taxation), or direct ownership (simpler but less protection). C-Corp is rarely optimal due to double taxation. Consult Israeli tax advisor for best structure based on your situation.