World Library  
Flag as Inappropriate
Email this Article

Taxation in Israel

Article Id: WHEBN0023935129
Reproduction Date:

Title: Taxation in Israel  
Author: World Heritage Encyclopedia
Language: English
Subject: Economy of Israel, Index of Israel-related articles, Tax, Taxation in Bhutan, Taxation in Indonesia
Collection: Economy of Israel, Israeli Law, Taxation by Country, Taxation in Israel
Publisher: World Heritage Encyclopedia
Publication
Date:
 

Taxation in Israel

Taxation in Israel include income tax, capital gains tax, value-added tax and land appreciation tax. The primary law on income taxes in Israel is codified in the Income Tax Ordinance. There are also special tax incentives for new immigrants to encourage aliyah.

Following Israel’s social justice protests in July 2011, Prime Minister Benjamin Netanyahu created the Trajtenberg Committee to hold discussions and make recommendations to the government's socio-economic cabinet, headed by Finance Minister Yuval Steinitz. During December 2011 the Knesset reviewed these recommendations and approved a series of amendments to Israel's tax law. Among the amendments were the raising of the corporate tax rate from 24% to 25% and possibly 26% in 2013. Additionally, a new top income bracket of 48% (instead of 45%) would be introduced for people earning more than NIS 489,480 per annum. People who earn more than NIS 1 million a year would pay a surtax of 2% on their income and taxation of capital gains would not be decreased to 20% but remain at 25% in 2012.

Contents

  • Individual tax 1
    • Filing status 1.1
    • Tax rates 1.2
  • Corporate tax 2
    • Filing status 2.1
    • Tax rates 2.2
  • VAT 3
  • National insurance (Social Security) 4
  • Stamp duty 5
  • New immigrants and returning citizens 6
    • 10 Year Tax Exemptions for Companies Managed by Returning residents or New Immigrants 6.1
    • 10 Year Exemption from Reporting Earnings Whose Source is from Abroad 6.2
    • Expansion of tax benefits for returning citizen and new immigrant 6.3
    • Pension benefits for returning residents and new immigrants 6.4
    • Tax benefits for new immigrant 6.5
    • Tax benefits for new immigrants on interest from foreign currency deposits 6.6
    • An adjustment year 6.7
  • References 7
  • External links 8

Individual tax

Filing status

As a basis for income, Israeli residents are taxed on their worldwide income, while non-residents are taxed only on their Israeli sourced income.[1] Income includes, employment, business income and passive income from bank deposits and savings.[2]

An individual is resident if his "center of life" is in Israel. If an individual spent 183 days or more, in Israel during the current tax year or; if an individual spent 30 days or more in Israel during the current tax year and the total days spent in Israel during the current tax year and the preceding two years were 425 days or more.[2]

A single filer will file a single assessment, while a married couple will file a joint assessment, but may opt out if the need arises.[2]

A year for tax purposes for individuals is a calendar year and must file their annual tax returns by the 30 April of the following year.[3]

Tax rates

The basic rates of income tax are as follows (according to the Israeli Tax Authority).

Annual income level (NIS) 2014 tax rate[1]
0 – 63,360 10%
63,361 – 108,120 14%
108,121 – 168,000 21%
168,001 – 240,000 31%
240,001 – 501,960 34%
501,960 - 811,560 48%
over 811,560 50%
Other income sources 2014 tax rate
Capital gains[1] 25-32%
Interest[1] 25-32%
Dividends[1] 25-32%
Inheritance[4] None

Corporate tax

Filing status

A corporation is deemed to be subject to Israeli taxes if its activities are managed and controlled within the State of Israel or established under its laws.[5] A domestic corporation is subject to taxation on their worldwide income, a foreign corporation with an Israeli subsidiary is only taxes on Israel based income.[5]

A year for tax purposes is a calendar year, however businesses may request a different schedule. Businesses must file their annual tax returns five months after the end of their year.[3]

Tax rates

As of September 2014, the corporate tax rate in Israel is 26.5%[6]

VAT

Value-added tax (VAT) in Israel, is applied to most goods and services, including imported goods and services. The standard rate was raised to 18% from 17% on 2 June 2013,[7] which it stood at after being raised from 16% on 1 September 2012.[8]

Certain items are zero rated which includes exported goods and the provision of certain services to non-residents. The value of imported goods for VAT purposes includes the customs duty, purchase tax and other levies.[9]

Electronic filing of VAT is mandatory in Israel.[10]

National insurance (Social Security)

Current rates of national insurance for employees, including health insurance and Bituah Leumi contributions (as of September 2013, in NIS)[11]

up to 5,171 monthly salary 5,171-42,435 monthly salary
Employee’s share 3.50% 12.00%
Employer’s share 3.45% 6.50%

Additionally self employed individuals pay between 9.82%-16.23%.[11]

Stamp duty

Stamp duty on signed documents was abolished in 2006.[12]

New immigrants and returning citizens

New immigrants and returning citizens are entitled to various benefits granted by the Tax Ordinance. These benefits were extended in 2008 in commemoration of Israel's 60th anniversary to try further to provide incentives for Jews to make Aliyah. A returning citizen is someone who has either resided overseas for at least 10 years; or resided overseas for 5 years and returned to Israel during 2007-2009; or were considered foreign residents on January 1 2007. Special benefits also exist for returning scientists, and entrepreneurs. The law was introduced in order to persuade many Israelis, who had made yerida (left the state of Israel) to return.[13] These tax benefits are offered to new immigrants who made Aliyah after January 1, 2007 as follows:

10 Year Tax Exemptions for Companies Managed by Returning residents or New Immigrants

Returning residents or new immigrants who own and manage a foreign company that is active abroad, or own its shares, will no longer be automatically subject to Israeli taxes. Thus, the company will be able to continue generating tax-free revenues, so long as these revenues are not generated in Israel.[11]

10 Year Exemption from Reporting Earnings Whose Source is from Abroad

Returning residents or new immigrants, and the companies that are under their direction, are not obligated to report earnings that benefit from exemption. Only income from activities in Israel and from Israeli investments and assets that is generated following Aliyah or return to the country is subject to reporting and taxation according to regular tax laws.[11]

Expansion of tax benefits for returning citizen and new immigrant

Returning residents and new immigrants will now be exempt from taxes for 10 years on income generated outside Israel. This covers all income, active or passive, such as interest, dividends, pensions, royalties and rental of assets. All income, whether from the realization of assets and investments abroad or from regular income abroad, is tax exempt.[11]

Pension benefits for returning residents and new immigrants

New immigrant will be exempt from paying taxes on their pension. Returning residents will be exempt from paying taxes on their pension for a period of 10 years.[11]

Tax benefits for new immigrant

New immigrants will enjoy tax deductions based on the following division:[11]

  • During the first 18 months – 3 tax credit points.
  • During the following year – 2 points.
  • During the third year – 1 point.

Tax benefits for new immigrants on interest from foreign currency deposits

New Immigrants are entitled to exemption from paying tax on interest on foreign currency deposits for 20 years, so long as the source of those deposits is capital they possessed prior to their immigration, and which was deposited in an Israeli banking institution.

An adjustment year

New immigrants and returning residents can fill an application form for an adjustment year. During the year they will not be considered Israeli citizens for tax purposes. At the end of the year, If they decide to stay in Israel they will enjoy all the benefits that are part of the new tax reform.[11]

References

  1. ^ a b c d e Your taxes: Tax rates for 2014 - Retrieved 9 September 2014
  2. ^ a b c Israel Highlights 2014 Section - "Personal Taxation", page 2
  3. ^ a b Taxation and Investment in Israel 2012 Section - "3.7 Administration", page 12
  4. ^ Israel Highlights 2014 Section - "Other taxes on Individuals", page 2
  5. ^ a b Taxation and Investment in Israel 2012 Section - "3.2 Residence", page 9
  6. ^ Corporate tax rates table - Retrieved 9 September 2014
  7. ^ VAT hits 18% high for third time in Israel's history
  8. ^ Taxation and Investment in Israel 2012 Section 5.1, page 15
  9. ^ Israel Highlights 2014 Section - "Value added tax", page 3
  10. ^ VAT/GST electronic filing and data extraction Section - "Is electronic filing of periodic VAT/GST returns mandatory or optional?", Page 11
  11. ^ a b c d e f g h Immigration to Israel: Israeli Tax Ramifications and Benefits - Retrieved 9 September 2014
  12. ^ Taxation and Investment in Israel 2012 Section 5.5, page 16
  13. ^ New Israeli Tax Incentive for Foreign Residents

External links

  • 2014 Israeli Tax Calculator
This article was sourced from Creative Commons Attribution-ShareAlike License; additional terms may apply. World Heritage Encyclopedia content is assembled from numerous content providers, Open Access Publishing, and in compliance with The Fair Access to Science and Technology Research Act (FASTR), Wikimedia Foundation, Inc., Public Library of Science, The Encyclopedia of Life, Open Book Publishers (OBP), PubMed, U.S. National Library of Medicine, National Center for Biotechnology Information, U.S. National Library of Medicine, National Institutes of Health (NIH), U.S. Department of Health & Human Services, and USA.gov, which sources content from all federal, state, local, tribal, and territorial government publication portals (.gov, .mil, .edu). Funding for USA.gov and content contributors is made possible from the U.S. Congress, E-Government Act of 2002.
 
Crowd sourced content that is contributed to World Heritage Encyclopedia is peer reviewed and edited by our editorial staff to ensure quality scholarly research articles.
 
By using this site, you agree to the Terms of Use and Privacy Policy. World Heritage Encyclopedia™ is a registered trademark of the World Public Library Association, a non-profit organization.
 



Copyright © World Library Foundation. All rights reserved. eBooks from World eBook Library are sponsored by the World Library Foundation,
a 501c(4) Member's Support Non-Profit Organization, and is NOT affiliated with any governmental agency or department.