The Israel-Romania double tax treaty was signed on 15 June 1997 and applies from 1 January 1999.
Rent and gains on selling property are taxed first in Romania, where the property is. Israel gives a credit up to the Israeli tax.
Choosing Israel's 15% track (section 122A) means giving up the credit, so the Romanian tax becomes a final cost.
Romanian tax on dividends rose to 16% in 2026. The treaty caps it at 15%, with an Israeli residence certificate.
Keep tax receipts, choose the track each year, request a residence certificate, file on time, and plan the sale.
The Israel-Romania tax treaty: the short answer
The Israel-Romania tax treaty was signed on 15 June 1997 and applies from 1 January 1999. For property it sets a simple principle: Romania, where the property is, has the first right to tax the rent and the gain on a sale, and an Israeli resident gets a credit in Israel for the Romanian tax, up to the Israeli tax on the same income. The treaty does not cancel Israeli tax; it prevents paying twice on the same shekel.
"There is a treaty, so I do not pay tax in Israel, right?" That is probably the most common misunderstanding I meet among Israeli investors. The answer is no, and in some cases it is exactly where people lose money.
What a tax treaty is, and why it matters to property owners
A double tax treaty is an agreement between two countries that decides who taxes each type of income, and how the other country takes account of tax already paid.
Without a treaty, an Israeli resident with property in Romania could pay full tax in both countries on the same rent. With the treaty there is an order: one country taxes first, and the other gives a credit.
The treaty text is available on the Romanian legislation portal, under "Convenție 15/06/1997", and on the Israel Tax Authority website.
What the treaty says about property
Rental income
Income from immovable property is taxed in the country where the property is located. So Romania taxes the rent under its own law: currently 10% after a fixed 20% deduction. For details and deadlines, see our guide to rental income tax in Romania.
Gains on a sale
Gains from selling immovable property may also be taxed in the country where the property is located. In Romania, an individual pays a percentage of the transaction value on a sale: 3% if held for up to three years, 1% after three years. More on that in our article on tax on selling property in Romania.
The credit in Israel
An Israeli resident is taxed in Israel on worldwide income. Under the treaty, Israel allows the tax paid in Romania to be deducted from the Israeli tax, but no more than the Israeli tax on the same income.
The two Israeli tracks, and the trap in the 15% track
For rent from property abroad, an Israeli resident has two options under the Income Tax Ordinance:
| 15% track (section 122A) | Marginal-rate track | |
|---|---|---|
| Rate | 15% of the rent | Personal tax brackets |
| Deductible expenses | Depreciation only | All allowable expenses |
| Credit for Romanian tax | None | Yes, under the treaty |
| Usually suits | High tax bracket, low expenses | Low tax bracket, or high expenses |
The trap: choosing the 15% track means giving up the credit, so the Romanian tax becomes a final cost. The treaty exists, but on that track you do not benefit from it.
The Israel-Romania treaty is a good tool, but it is not magic.
Dividends, interest and royalties: holding through a company
Anyone holding property through a Romanian company (SRL) and taking profits out meets the dividend articles. According to PwC Tax Summaries, from 1 January 2026 Romanian tax on dividends rose to 16%, and it can be reduced under a tax treaty.
The maximum rates in the Israel-Romania treaty:
- Dividends: 15%.
- Interest: 10%, and 5% in certain cases of equipment sold on credit.
- Royalties: 10%.
To benefit from the treaty rate, the paying Romanian company usually needs a certificate of tax residence from the Israel Tax Authority. Without it, the full Romanian rate is withheld.
What the treaty does not do
- It does not exempt you from Israeli tax. 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 after paying tax in Romania.
- It does not cover local taxes. The annual property tax paid to the Romanian local authority is a separate matter.
- It does not deal with social security. There is a separate Israel-Romania agreement for that, in force since 2013 according to Israel's National Insurance Institute.
And if you are considering a Romanian mortgage: we cover whether it affects your credit rating in Israel in a separate article.
Checklist: using the treaty in practice
- Keep every proof of tax paid in Romania. Without it there is no credit in Israel.
- Choose the Israeli track every year, based on that year's figures, with a tax adviser.
- Request an Israeli residence certificate when there are dividends or interest from Romania.
- File on time in both countries. In Romania, the annual return is due by 25 May, with ANAF.
- Plan the sale in advance, because that is where the gap between the two systems is widest.
When we guide buyers in our project in Balotești, we prepare the list of questions for their cross-border tax adviser before the preliminary contract, because decisions like buying personally or through a company are hard to change later.
Frequently asked questions
Is there a tax treaty between Israel and Romania?
Yes. The double tax treaty was signed on 15 June 1997 and applies from 1 January 1999. It covers residents of both countries, individuals and companies.
Where is tax paid on rent from a property in Romania?
First in Romania, where the property is, and then it is reported in Israel. On the Israeli marginal-rate track you get a credit for the Romanian tax; on the 15% track you do not.
Does the treaty exempt me from tax in Israel?
No. The treaty prevents double taxation, meaning it gives a credit for tax paid in Romania up to the Israeli tax. If the Israeli tax is higher than the Romanian tax, you pay the difference in Israel.
What happens when I sell a property in Romania?
In Romania an individual pays 3% of the transaction value if held for up to three years, and 1% after that. In Israel you report the capital gain and get a credit for the Romanian tax under the treaty, up to the Israeli tax.
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 caps it at 15%, provided the paying company receives an Israeli certificate of tax residence.
The bottom line
The Israel-Romania treaty is a good tool, but it is not magic. It sets an order: Romania taxes first, Israel gives a credit. What stays in your pocket depends on the decisions you make: the Israeli track, the ownership structure and the timing of a sale.
If you are at the planning stage, book a 30-minute call with me. I will not replace your tax adviser, but I will help you reach them with the right questions. For the full picture of taxes for Israeli buyers, see our tax guide.
Moti Azulay, Compass Group Romania
Sources and data: Romanian legislation portal (Romania-Israel convention for the avoidance of double taxation, 15.6.1997; Fiscal Code, Law 227/2015) · Israel Tax Authority (section 122A of the Income Tax Ordinance) · PwC Tax Summaries, Romania · Romanian tax agency (ANAF) · National Insurance Institute of Israel.
This article is for general information only and is not legal, tax or financial advice. Applying the treaty depends on your personal circumstances and on current law in both countries. Before any decision, consult a tax adviser who knows Israeli and Romanian law.
Now you know more.
This article is general information, not legal, tax or financial advice. Consult local professionals before any transaction.
