Through the draft economic arrangements law accompanying the state budget, the Ministry of Finance is promoting several moves that will affect the aviation industry, such as a new travel tax, a review of the way aircraft are depreciated, and a secret section on making the security system more efficient.
The first action is to review the method of devaluing aircraft. At present, airlines benefit from an annual depreciation rate of 30%, which enables them to spread the value of the aircraft for tax purposes over a fairly short period – 3.3 years. The Ministry of Finance says this does not reflect the economic life of the aircraft, which can be twenty years or more, which is unusually high compared to allowable depreciation rates in other countries.
Therefore, the Ministry of Finance proposes to reduce the annual depreciation rate to 5%, so that the value of the aircraft is reduced over twenty years. The change will apply to aircraft purchased from January 1, 2026 onwards. The profit in tax collection is estimated at 180 million shekels in 2029, rising to 260 million shekels by 2032.
New aviation tax
The second initiative is to impose a new tax on passenger flights departing from Israel, with each flight bearing a fixed tax aimed at reflecting the environmental costs of greenhouse gas emissions. The tax will be calculated according to the maximum take-off weight of the aircraft and the flight distance: short-haul flight up to 500 km; Medium distance journey of 500-4000 km; And a long-range flight of more than 4,000 kilometers. The tax will range from NIS 1,200 for a light aircraft on a short trip to about NIS 95,000 for a heavy aircraft on long trips.
According to Finance Ministry data, aviation is responsible for 3.4% of Israel’s greenhouse gas emissions, and the tax is designed to price out the costs of emissions, in line with practice in countries such as the UK, France, Sweden, Germany and Austria. Annual revenues from the tax are estimated at about one billion shekels during a full year of implementation.
Aviation security
The third measure, to make aviation security arrangements more efficient, is secret separation. The state currently supports 95% of the security costs of Israeli airlines. In March, the government revised the state’s sharing of these costs from 95% to 92.5% starting in 2029. El Al, which, through its Ofek subsidiary, provides security services to all Israeli airlines, will be entitled to the specified sharing percentage. If El Al’s annual security costs exceed $13 million, the state will bear 97.5% of the surplus.
A similar arrangement will be applied to Israir and Arkia, but with a much lower ceiling: $2 million for each company, with a potential annual supplement of $500,000 (versus $1 million for El Al).
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Published by Globes, Israel Business News – en.globes.co.il – on November 10, 2025.
© Copyright Globes Publisher Itonut (1983) Ltd., 2025.
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