Similar to other countries around the globe that have a participation exemption regime, Israel has regulated participation exemption rules in relation to an Israeli holding company. Such company enjoys different exemptions, among others, exemption on capital gain when selling the shares of the companies it holds, exemption on dividends distributed from the companies it holds, exemption on dividend, interest and capital gain from quoted securities in the Israeli stock exchange, exemption on interest and linkage differentials the company received from a financial establishment etc’. Furthermore, dividend received by a foreign resident shareholder, from an Israeli Holding Company would be subject to only 5% tax rate. This section, though trying to encourage foreign residents to invest through Israeli companies still has somewhat of a deterrent factor. In this context, we see that in some of the recent tax treaties Israel has signed (with the U.K., Denmark, Belgium and Georgia), there is a tendency to lower the tax rates and even grant a full exemption in the source country on dividend distributions in case of a substantial holding of 10% or more by the parent company. As a result, Israel’s taxation status becomes equal to other countries giving an exemption in this case. Moreover, the fact that Israel is an advanced country with a worldwide activity and a diverse number of tax treaties, improves its attraction for foreign investors to invest through an Israeli holding company.