Brazil & Israel Double Taxation Agreement (Decree No. 5.576/2005)

Introduction

If you live in Brazil and receive income from Israel — or live in Israel and receive income from Brazil — you might wonder which country has the right to tax your income. The Double Taxation Agreement (DTA) between Brazil and Israel was created to prevent people from paying tax twice on the same income.

This treaty applies to individuals who are tax residents in only one of the two countries, as no one can be considered a tax resident in both at the same time. The treaty defines which country has priority to tax salaries, pensions, and retirement benefits, and how each government should avoid double taxation.

Under Brazilian tax law, residents must declare their global income and assets. However, this does not always mean double taxation, since tax treaties and domestic rules provide relief. The goal is to ensure transparency and proper control of assets, including for inheritance purposes.

My name is Clivanir Cassiano de Oliveira, Brazilian Tax Lawyer and Founder of Cassiano Advocacia, by the time you finish reading this article, you will understand how the international tax rules apply to individuals with Israeli or Brazilian salaries, pensions, or retirement benefits, who are tax residents in either Brazil or Israel.

Independent Professional Services – Article 14

According to Article 14, income from independent professional services (for example, doctors, lawyers, engineers, architects, teachers, or artists) is generally taxable only in the country of residence.

However, if the payment is made by a person or company resident in the other country, or if the income is linked to a permanent establishment there, the other country (the State of source - country that pays) may also tax that income. When this happens — that is, when both countries can tax — the same treaty method (credit or deduction) is used to avoid double taxation.

Citation in Portuguese of the Brazilian Decree that enacted the Brazil-Israel Double Taxation Agreement: ARTIGO 14 - Serviços Profissionais Independentes 1. Os rendimentos obtidos por um residente de um Estado Contratante pela prestação de serviços profissionais, ou em decorrência de outras atividades de caráter independente, serão tributáveis apenas nesse Estado, a não ser que a remuneração por tais serviços ou atividades seja paga por um residente do outro Estado Contratante ou caiba a um estabelecimento permanente aí situado. Nesses casos, os rendimentos poderão ser tributados nesse outro Estado. 2. A expressão "serviços profissionais" abrange, em especial, as atividades independentes de caráter científico, literário, artístico, educacional ou pedagógico, assim como as atividades independentes de médicos, advogados, engenheiros, arquitetos, dentistas e contadores. Source: Decree No. 5.576/2005, which promulgated the Brazil–Israel Double Taxation Agreement.

Employment Income (Private Salaries) – Article 15

Under Article 15, salaries and other remuneration received by an employee are, as a general rule, taxable in the State of residence — meaning the country where the person is considered a tax resident.

But, if the work is physically performed in another country and the payment comes from that country, (usually the Source State - country that pays) also has the right to tax that income.

Citation in Portuguese of the Brazilian Decree that enacted the Brazil-Israel Double Taxation Agreement: ARTIGO 15 - Serviços Profissionais Dependentes 1. Ressalvadas as disposições dos Artigos 16, 18, 19, 20 e 21, os salários, ordenados e outras remunerações similares derivado/auferido por um residente de um Estado Contratante em razão de um emprego somente serão tributáveis nesse Estado, a não ser que o emprego seja exercido no outro Estado Contratante. Se o emprego for assim exercido, as remunerações correspondentes poderão ser tributadas nesse outro Estado. 2. Não obstante as disposições do parágrafo 1º , as remunerações percebidas por um residente de um Estado Contratante em função de um emprego exercido no outro Estado Contratante serão tributáveis somente no primeiro Estado mencionado se: a) o beneficiário permanecer no outro Estado durante um período ou períodos que não excedam, no total, 183 dias em qualquer período de doze meses que comece ou termine durante o ano fiscal considerado; e b) as remunerações forem pagas por um empregador, ou em nome de um empregador, que não seja residente do outro Estado; e c) o encargo das remunerações não couber a um estabelecimento permanente que o empregador possua no outro Estado. 3. Não obstante as disposições precedentes do presente Artigo, as remunerações percebidas em razão de um emprego exercido a bordo de um navio ou de uma aeronave explorados no tráfego internacional poderão ser tributadas no Estado Contratante em que estiver situada a sede de direção efetiva da empresa. Source: Decree No. 5.576/2005, which promulgated the Brazil–Israel Double Taxation Agreement.

In simple terms:

• If a Brazilian tax resident works in Brazil and is paid by a Brazilian employer, the income is taxable in Brazil.

• If an Israeli tax resident works in Israel and is paid by an Israeli employer, the income is taxable in Israel.

• But if a Brazilian resident works for an Israeli company and receives payment from Israel, both countries may have the right to tax the same income. Whenever both Brazil and Israel are allowed to tax the same payment, the treaty method to avoid double taxation applies. This method works through: Credit, when Israel grants a credit for the tax paid in Brazil; or Deduction, when Brazil allows the Israeli tax to be deducted from the taxable base in Brazil. These mechanisms ensure that the same salary is not taxed twice.

Directors’ Fees and Board Remuneration – Article 16

Under Article 16, payments received by a person as a member of the board of directors or similar governing body of a company in the other country may be taxed in that other country (Source State - country that pays) .

Citation in Portuguese of the Brazilian Decree that enacted the Brazil-Israel Double Taxation Agreement: ARTIGO 16 - Remunerações de Direção: As remunerações de direção e outras retribuições similares recebidas por um residente de um Estado Contratante na qualidade de membro da diretoria ou de qualquer conselho de uma sociedade residente do outro Estado Contratante poderão ser tributadas nesse outro Estado. Source: Decree No. 5.576/2005, which promulgated the Brazil–Israel Double Taxation Agreement.

For example: If an Israeli tax resident is part of the board of a Brazilian company and receives a director’s fee, Brazil — as the country where the company is established — may tax that income. If Israel also taxes it as part of worldwide income, the treaty again applies the credit or deduction method to prevent double taxation.

Private Pensions and Annuities – Article 18

Article 18 explains how private pensions and annuities are taxed between Brazil and Israel. It applies to retirement payments and similar income arising from private employment or private pension plans, not to government pensions (which are covered by Article 19).

1. General rule – Taxed in the country of residence

Private pensions and annuities received by a resident of one country are generally taxable only in that country, which is the State of residence. In practice, this means that if a retired person lives in Brazil and receives a private pension from abroad, Brazil has the right to tax that income as part of the person’s worldwide income.

2. Exception – Tax also allowed in the source country (country that pays)

However, if the payment is made by a resident or permanent establishment in the other country, that Source State (the country paying the pension) may also tax the same income. For example:

• A Brazilian resident receives a private pension from an Israeli pension fund → Israel, as the State of source, may tax it;

• Brazil, as the State of residence, may also tax it under its domestic rules.

Whenever both countries have taxing rights, the treaty’s double-taxation relief methods apply.

3. Social-security pensions – Only taxed in the paying country

Article 18(3) makes an additional distinction: Payments made under a country’s public social-security system are taxable only in the country that pays them — that is, the Source State (country that pays) . So, a Brazilian social-security pension (INSS) is taxed only in Brazil, while an Israeli public social-security pension is taxed only in Israel.

Citation in Portuguese of the Brazilian Decree that enacted the Brazil-Israel Double Taxation Agreement: ARTIGO 18 - Anuidades e Pensões 1. Ressalvadas as disposições do parágrafo 2º do Artigo 19, as pensões, outras remunerações similares em razão de um emprego anterior e as anuidades pagas a um residente de um Estado Contratante poderão ser tributadas nesse Estado. 2. Todavia, tais pensões e outras remunerações similares poderão também ser tributadas no outro Estado Contratante se o pagamento correspondente for efetuado por um residente desse outro Estado ou por um estabelecimento permanente nele situado. 3. Não obstante as disposições dos parágrafos 1º e 2º , as pensões e outros pagamentos efetuados em decorrência da legislação de seguridade social de um Estado Contratante ou uma de suas subdivisões políticas ou uma autoridade local serão tributáveis somente nesse Estado. 4. No presente Artigo: a) a expressão "pensões e outras remunerações similares" significa pagamentos periódicos efetuados após a aposentadoria em razão de emprego anterior ou a título de compensação por danos sofridos em conseqüência de emprego anterior; b) o termo "anuidade" significa uma quantia determinada, pagável periodicamente em prazos determinados, a título vitalício ou por período de tempo determinado ou determinável, em decorrência de um compromisso de efetuar os pagamentos como retribuição de um pleno e adequado contravalor em dinheiro ou avaliável em dinheiro (que não seja por serviços prestados). Source: Decree No. 5.576/2005, which promulgated the Brazil–Israel Double Taxation Agreement.

Government Salaries and Pensions – Article 19

Article 19 covers payments made by governments or public entities (rather than private employers).

1. Salaries and public remuneration

• General rule: salaries and similar payments made by a government or local authority of one country are taxable only in that country — the State of source (country that pays) , which pays the income.

  Example: an employee working for the Government of Israel is normally taxed only in Israel, even if the work is performed abroad.

• Exception: if the person receiving the payment is both a resident and a national of the other country, then the income is taxable only in that other country (the State of residence).

  Example: a Brazilian national living in Brazil who receives a salary from an Israeli public institution may be taxed only in Brazil.

2. Public pensions: The same logic applies to pensions:

• They are taxable only in the country that pays them (the State of source).

• But if the recipient is both resident and national of the other country, that other country (the State of residence) has exclusive taxing rights.

3. Government business activities: If a government is engaged in commercial or business activities, the related payments (salaries or pensions) are not covered by Article 19.Instead, the ordinary rules for private income apply —under Articles 15, 16, and 18 of the treaty.

Citation in Portuguese of the Brazilian Decree that enacted the Brazil-Israel Double Taxation Agreement: ARTIGO 19 - Funções Públicas 1. a) Os salários, ordenados e outras remunerações similares, excluindo as pensões, pagas por um Estado Contratante ou uma de suas subdivisões políticas ou uma autoridade local a uma pessoa física, por serviços prestados a esse Estado ou subdivisão ou autoridade, serão tributáveis somente nesse Estado. b) Todavia, tais salários, ordenados e outras remunerações similares serão tributáveis somente no outro Estado Contratante se os serviços forem prestados nesse outro Estado e se a pessoa física for um residente desse outro Estado que: i) – seja um nacional desse Estado; ou ii) – não se tenha tornado um residente desse Estado unicamente com a finalidade de prestar os serviços. 2. a) Qualquer pensão paga por um Estado Contratante ou uma de suas subdivisões políticas ou uma autoridade local, diretamente ou por meio de fundos por eles constituídos, a uma pessoa física em razão de serviços prestados a esse Estado ou subdivisão ou autoridade será tributável somente nesse Estado; b) Todavia, tal pensão será tributável somente no outro Estado Contratante se a pessoa física for residente e nacional desse Estado. 3. Aplicar-se-á o disposto nos Artigos 15, 16 e 18 aos salários, ordenados e outras remunerações similares, e pensões pagas em razão de serviços prestados no âmbito de uma atividade empresarial exercida por um Estado Contratante ou uma de suas subdivisões políticas ou uma autoridade local. Source: Decree No. 5.576/2005, which promulgated the Brazil–Israel Double Taxation Agreement.

Methods to Eliminate Double Taxation

The treaty ensures that income is not taxed twice, by applying two relief methods:

In Israel: Israel grants a tax credit for the amount of tax already paid in Brazil.

In Brazil: Brazil allows the Israeli tax paid on the same income to be deducted from the taxable base in Brazil.

Conclusion

Living or working between Brazil and Israel can create complex tax situations. The Brazil–Israel Double Taxation Agreement (Decree No. 5.576/2005) defines which country has the right to tax each type of income and how to avoid paying tax twice.

Understanding these principles helps expatriates and cross-border professionals stay compliant — and avoid paying more tax than they should.

In short:

Type of Income	Article	General Rule	Exception	Country Entitled to Tax	Double Taxation Relief Applies?
Independent Professional Services (e.g., doctors, lawyers, engineers, teachers, artists)	Art. 14	Taxed only in the State of residence (where the professional is a tax resident).	If payment is made by a resident or permanent establishment in the other country, that country may also tax.	Residence (general) / Both (if payment originates abroad).	✅ Yes — credit or deduction.
Employment Income (Private Salaries)	Art. 15	Taxed in the State of residence (where the person is a tax resident).	If the work is physically performed in the other country and the payment comes from that country, the State of source may also tax.	Residence (general) / Both (if work performed abroad).	✅ Yes — credit or deduction.
Directors’ Fees and Board Remuneration	Art. 16	—	Always taxable in the State where the company is resident (the country of the board position).	Source (company’s country).	✅ Yes — if the residence country also taxes worldwide income.
Private Pensions and Annuities	Art. 18(1)-(2)	Taxed in the State of residence (where the retiree lives).	If the pension or annuity is paid by a resident or permanent establishment in the other country, the State of source may also tax.	Residence (general) / Both (if paid from abroad).	✅ Yes — credit or deduction.
Public Social-Security Pensions	Art. 18(3)	Taxed only in the State that pays (the social-security system’s country).	—	Source only.	❌ No — only one country may tax.
Government Salaries and Public Remuneration	Art. 19(1)	Taxed only in the State of source (the government paying the salary).	If the person is both resident and national of the other country, that other country (residence) has exclusive taxing rights.	Source (general) / Residence (exception).	❌ No — only one country may tax.
Public Pensions (from government service)	Art. 19(2)	Taxed only in the State that pays the pension (source).	If the recipient is resident and national of the other country, that other country may tax instead.	Source (general) / Residence (exception).	❌ No — only one country may tax.
Government Business Activities	Art. 19(3)	When a government acts commercially, normal private-sector rules apply.	—	Residence or both, depending on Articles 15–18.	✅ Yes — credit or deduction.

Interpretation

• State of Residence → the country where the person is a tax resident (can only be one).

• State of Source → the country that pays or from which the income originates.

• When both countries may tax, the treaty relief methods apply:

  • Credit (Israel);

  • Deduction (Brazil).

Alignment with the OECD Model Convention

In general, the Brazil–Israel Double Taxation Agreement (Decree No. 5.576/2005) follows the same structure and interpretation principles set out in the OECD Model Tax Convention and its Commentaries. The main rules — such as taxing independent services, employment income, directors’ fees, pensions, and government remuneration — are consistent with the OECD Model.

The only significant difference is that the Brazil–Israel Treaty still includes Article 14 (Independent Personal Services), which was later removed from the OECD Model and incorporated into Article 7 (Business Profits). Apart from this historical distinction, the treaty’s logic, definitions, and methods to avoid double taxation (credit or deduction) are fully aligned with the OECD framework.

Reproduction or distribution of this article, in whole or in part, is permitted only with proper credit to the author. This material must cite Clivanir Cassiano de Oliveira, OAB n. 34.395B, Brazilian Tax Lawyer and Founder of Cassiano Sociedade de Advocacia, as the original writer and source.

A law firm focused on Tax and International Tax Law, especially for expatriates living in Brazil and Brazilians with income abroad.

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📘 Official rule of the Brazil–Israel Tax Treaty: Decree No. 5.576/2005 (Planalto.gov.br)

🌐 OECD Model Tax Convention: https://www.oecd.org/en/topics/oecd-model-tax-convention-on-income-and-on-capital.html

If you live in Brazil or Israel and want to understand how your salary, pension, or investments are taxed under this treaty, our office provides individual tax consultations (in English or Portuguese) to help you stay compliant and avoid double taxation.