Income from the App Store and Google Play - how it works for Israelis
Your app is live in the stores, the downloads are coming in, and the first monthly payment from Apple or Google is on its way to your account. Now come the questions: what exactly am I taxed on, what the users paid or what Apple transferred? What about VAT, when the buyers are scattered around the world? And why did Apple ask me for an American tax form? We have put the whole picture in order.
The structure: you sell through the store, not to the user directly
The app store model is in substance similar to a Merchant of Record: the user's purchase is made facing Apple or Google (through their regional entities, for example Apple Distribution International in Ireland), they are the ones handling local consumption taxes around the world, and they are the ones transferring your share to you under the developer agreement, less the commission (30%, or 15% under Apple's small business program and the parallel Play terms).
The Israeli meaning: your settlement is with foreign corporations, on the basis of the store's monthly reports. Those reports are what determine your income - not screenshots of the dashboard, and not only what landed in the bank.
Income tax and VAT - the principles
- Income tax: app income is business income in every respect. It is recorded in shekels at the representative rate, and development and operating expenses (AI subscriptions, the developer account, servers, marketing) are recognized against it. If you are also an employee, the income is added on top of the salary, like any side project.
- VAT: the settlement with Apple or Google, which are foreign corporations, is the natural candidate for the zero rate as an export, subject to the conditions. The fact that some of the downloaders are Israeli is examined through the structure of the agreement with the store; in most cases the practice resembles that of an MoR. The final determination, as always in this area, is made on your agreement and your data.
- The store commission: treated according to the settlement structure. The principle is the same as with an MoR: you are taxed on your real consideration, and the recording has to be consistent with the store reports.
The payout arrives once a month, and late: Apple pays roughly 30 days or more after the end of the calendar month, Google at the beginning of the following month. For recording purposes, what governs is the periodic sales reports, not the date the money lands in the bank. Keep a simple monthly reconciliation: report, then recording, then bank.
The American forms and withholding at source
When registering as a developer in the stores you will be asked to fill in American tax forms, usually a W-8BEN (for an individual) declaring that you are a foreign resident as far as the US is concerned. Filling the form in correctly, including the Israel-US tax treaty clause, is what prevents unnecessary American withholding at source on your income (mainly around US sales). A few rules:
- An Israeli individual with no US connection: a W-8BEN, with the treaty clause. Not a W-9.
- Do you hold American citizenship or a green card? Stop. You are on an entirely different field (reporting duties to the IRS), and you should talk to us first.
- If tax was nevertheless withheld from you abroad, keep the supporting documents. In some cases it can be taken into account in Israel through the foreign tax credit mechanism.
Worth knowing: the expenses unique to app developers
| Expense | The treatment |
|---|---|
| The developer account - Apple Developer Program ($99 a year) and Google Play ($25 one time) | A recognized expense |
| Test devices - an iPhone or Android bought for development and testing | Recognized subject to the business use, and usually through depreciation |
| ASO, icon design, screenshots - marketing and design services | Recognized |
| AI subscriptions and development tools - as with any builder | Recognized for income tax; the full table is in the expenses guide |
A licensed Israeli CPA (license no. 500125101) accompanying businesses and self-employed clients across Israel - including founders, builders and owners of digital products. Bookkeeping, filings to the authorities, annual reports and personal financial guidance. About Adir →
Official sources
- Apple - App Store Small Business Program
- Google Play Console - developer payments
- IRS - Form W-8BEN
- Israel Tax Authority - foreign income and the foreign tax credit (Hebrew)
The information in this guide is general only, current as of August 2026, and does not constitute tax advice or a substitute for professional advice fitted to your business's circumstances. It is a condensed adaptation of our fuller Hebrew guide. For personal advice - talk to us.
App income - the questions everyone asks
Am I taxed on what the user paid or on what Apple transferred to me?
On your consideration under the agreement and the store reports, meaning your share of the sales, with the store commission treated according to the settlement structure. What matters is consistency with the official Apple or Google reports: they are the base document, and the reconciliation against the bank is done by them too. Do not record "what came in" without the reports behind it.
The app earns only a few hundred shekels a month. Do I really need a business file?
If the income is recurring, yes: this is business activity even at modest amounts, and at this stage an osek patur will usually be enough. The upside is that you will be able to recognize expenses (the developer account, tools, devices), and with a young app that often means zero tax in practice. Regularizing now is significantly cheaper than regularizing retroactively.
What is Apple's 15% track, and how does it relate to tax?
The App Store Small Business Program lowers Apple's commission from 30% to 15% for developers with revenue of up to one million dollars a year, meaning more money reaches you. There is no special tax trick in it: your consideration is simply larger. If you are eligible and have not registered, that is probably the fastest gain you will make this year. Registration is through the developer account.
Google withheld tax at source on my US income. Is that money lost?
Not necessarily. American withholding usually stems from a missing W-8BEN or one where the treaty clause was not applied, so the first step is fixing the form going forward. As for what has already been withheld, keep the supporting documents; in some cases the foreign tax can be credited against the Israeli tax in the annual report. A case like this is worth handling properly, so talk to us.
I have in-app purchases, subscriptions and ads. Is it all the same thing?
In principle yes: it is all your business income. In terms of sources it is worth separating them in the recording. Store income (purchases and subscriptions) arrives from Apple or Google according to their reports, and advertising income (AdMob, AdSense) arrives through a separate channel with reports of its own. Each channel has its own small recording routine.