Taxation in Israel

Last updated

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.

Contents

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.

Income tax

Filing status

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

An individual is deemed to be resident if they spend 183 days or more in Israel during the current tax year, or 30 days or more in Israel during the current tax year and 425 days or more during the current tax year and the preceding two years. [2]

A single person files a single assessment, while a married couple normally files 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). Taxes are charged based on annual income; salaries in Israel are usually discussed at the monthly rate so these are included for convenience.

Annual income level (NIS)Monthly income level (NIS)2024 tax rate [4]
0 – 84,1200 - 7,01010%
84,121 – 120,7207,011 - 10,06014%
120,721 – 193,80010,061 - 16,15020%
193,801 – 269,28016,151 - 22,44031%
269,281 – 560,28022,441 - 46,69035%
560,281 - 721,56046,691 - 60,13047%
over 721,560over 60,13050%
Other income sources2014 tax rate
Capital gains [1] 25-32%
Interest [1] 25-32%
Dividends [1] 25-32%
Inheritance [5] 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. [6] A domestic corporation is subject to taxation on its worldwide income. A foreign corporation with an Israeli subsidiary is only taxed on income derived from, accrued or received in Israel, while a non-resident company without a subsidiary is only taxed on income sourced in Israel. [6]

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

The corporate tax rate in Israel was 25% as of January 1, 2016, [7] decreased to 24% on January 1, 2017, and to 23% on January 1, 2018. [8]

Value-added tax

Value-added tax (VAT) in Israel, is applied to most goods and services, including imported goods and services. From 1 October 2015 the standard rate was decreased to 17%, from 18%. [9] [10] It had been raised from 16% to 17% on 1 September 2012, [11] and to 18% on 2 June 2013. [12]

Certain items, such as exported goods and the provision of certain services to non-residents are zero-rated. VAT on imported goods is levied on value plus customs duty, purchase tax and other levies. [13] [14]

Multinational companies that provide services to Israel through the Internet, such as Google and Facebook, must pay VAT. [15]

Electronic filing of VAT is mandatory. [16]

National insurance (Social Security)

Current rates of national insurance for employees, including health insurance and Bituah Leumi contributions (as of January 2020, in NIS) [17]

up to 6,331 monthly salary6,331–44,020 monthly salary 
Employee's share3.50%12.00% 
Employer's share3.55%7.60% [18]

Additionally self-employed individuals pay between 9.82% and 16.23%. [17]

Stamp duty

Historically, Israel had a stamp duty on signed documents. [19] Documents and duties were regulated by the 1961 "Stamp Tax on Documents" (Law 5731-1961), [20] the 1965 "Stamp Tax on Documents Regulations", [19] and subsequent Additions. [19] Documents below a certain value could be self-stamped at a postal-bank; in 2004, this threshold value was raised from 62,500 NIS to 125,000 NIS. [19] As of 2006 this tax is no longer collected. [21]

Israel has no other stamp-based taxes. [22]

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. [23] These tax benefits are offered to new immigrants who made Aliyah after January 1, 2007 as follows:

10-year exemptions for companies

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. [17]

10-year exemption for earnings from abroad

Returning residents or new immigrants, and the companies that are under their direction, are not obliged 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. [17]

10-year expansion of tax benefits

Returning residents and new immigrants are 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 exempt from tax. [17]

Pension benefits

New immigrants are exempt from paying taxes on their pension. Returning residents are exempt from paying taxes on their pension for ten years. [17]

Tax benefits for new immigrants

New immigrants are entitled to tax deductions as follows: [17]

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.[ citation needed ]

An adjustment year

New immigrants and returning residents can fill in an application form for an adjustment year. During the year they will not be considered to be Israeli citizens for tax purposes. At the end of the year, if they remain in Israel they are entitled to all the benefits that are part of the new tax reform. [17]

Related Research Articles

<span class="mw-page-title-main">Taxation in the United Kingdom</span> United Kingdom tax codes

In the United Kingdom, taxation may involve payments to at least three different levels of government: central government, devolved governments and local government. Central government revenues come primarily from income tax, National Insurance contributions, value added tax, corporation tax and fuel duty. Local government revenues come primarily from grants from central government funds, business rates in England, Council Tax and increasingly from fees and charges such as those for on-street parking. In the fiscal year 2014–15, total government revenue was forecast to be £648 billion, or 37.7 per cent of GDP, with net taxes and National Insurance contributions standing at £606 billion.

<span class="mw-page-title-main">Taxation in the Republic of Ireland</span> Irish tax code

Taxation in Ireland in 2017 came from Personal Income taxes, and Consumption taxes, being VAT and Excise and Customs duties. Corporation taxes represents most of the balance, but Ireland's Corporate Tax System (CT) is a central part of Ireland's economic model. Ireland summarises its taxation policy using the OECD's Hierarchy of Taxes pyramid, which emphasises high corporate tax rates as the most harmful types of taxes where economic growth is the objective. The balance of Ireland's taxes are Property taxes and Capital taxes.

Taxation in Indonesia includes income tax, value added tax and carbon tax.

Taxation in the Netherlands is defined by the income tax, the wage withholding tax, the value added tax and the corporate tax.

The tax system of the Russian Federation is a complex of relationships between fiscal authorities and taxpayers in the field of all existing taxes and fees. It implies continuous communication of all its members and related objects: payers; legislative framework; oversight authorities; types of mandatory payments. The Russian Tax Code is the primary tax law for the Russian Federation. The Code was created, adopted and implemented in three stages.

The Tanzania Revenue Authority (TRA) is the government agency of Tanzania, charged with the responsibility of managing the assessment, collection and accounting of all central government revenue in Tanzania.

Taxes provide the most important revenue source for the Government of the People's Republic of China. Tax is a key component of macro-economic policy, and greatly affects China's economic and social development. With the changes made since the 1994 tax reform, China has sought to set up a streamlined tax system geared to a socialist market economy.

Taxation in Norway is levied by the central government, the county municipality and the municipality. In 2012 the total tax revenue was 42.2% of the gross domestic product (GDP). Many direct and indirect taxes exist. The most important taxes – in terms of revenue – are VAT, income tax in the petroleum sector, employers' social security contributions and tax on "ordinary income" for persons. Most direct taxes are collected by the Norwegian Tax Administration and most indirect taxes are collected by the Norwegian Customs and Excise Authorities.

Taxes in Germany are levied at various government levels: the federal government, the 16 states (Länder), and numerous municipalities (Städte/Gemeinden). The structured tax system has evolved significantly, since the reunification of Germany in 1990 and the integration within the European Union, which has influenced tax policies. Today, income tax and Value-Added Tax (VAT) are the primary sources of tax revenue. These taxes reflect Germany's commitment to a balanced approach between direct and indirect taxation, essential for funding extensive social welfare programs and public infrastructure. The modern German tax system accentuate on fairness and efficiency, adapting to global economic trends and domestic fiscal needs.

<span class="mw-page-title-main">Taxation in South Africa</span>

Taxation may involve payments to a minimum of two different levels of government: central government through SARS or to local government. Prior to 2001 the South African tax system was "source-based", where in income is taxed in the country where it originates. Since January 2001, the tax system was changed to "residence-based" wherein taxpayers residing in South Africa are taxed on their income irrespective of its source. Non residents are only subject to domestic taxes.

<span class="mw-page-title-main">Taxation in Spain</span>

Taxes in Spain are levied by national (central), regional and local governments. Tax revenue in Spain stood at 36.3% of GDP in 2013. A wide range of taxes are levied on different sources, the most important ones being income tax, social security contributions, corporate tax, value added tax; some of them are applied at national level and others at national and regional levels. Most national and regional taxes are collected by the Agencia Estatal de Administración Tributaria which is the bureau responsible for collecting taxes at the national level. Other minor taxes like property transfer tax (regional), real estate property tax (local), road tax (local) are collected directly by regional or local administrations. Four historical territories or foral provinces collect all national and regional taxes themselves and subsequently transfer the portion due to the central Government after two negotiations called Concierto and the Convenio. The tax year in Spain follows the calendar year. The tax collection method depends on the tax; some of them are collected by self-assessment, but others follow a system of pay-as-you-earn tax with monthly withholdings that follow a self-assessment at the end of the term.

In Slovakia, taxes are levied by the state and local governments. Tax revenue stood at 19.3% of the country's gross domestic product in 2021. The tax-to-GDP ratio in Slovakia deviates from OECD average of 34.0% by 0.8 percent and in 2022 was 34.8% which ranks Slovakia 19th in the tax-to-GDP ratio comparison among the OECD countries. The most important revenue sources for the state government are income tax, social security, value-added tax and corporate tax.

Taxes in Bulgaria are collected on both state and local levels. The most important taxes are collected on state level, these taxes include income tax, social security, corporate taxes and value added tax. On the local level, property taxes as well as various fees are collected. All income earned in Bulgaria is taxed on a flat rate of 10%. Employment income earned in Bulgaria is also subject to various social security insurance contributions. In total the employee pays 12.9% and the employer contributes what corresponds to 17.9%. Corporate income tax is also a flat 10%. Value-Added Tax applies at a flat rate of 20% on virtually all goods and services. A lower rate of 9% applies on only hotel services.

Taxation in Belgium consists of taxes that are collected on both state and local level. The most important taxes are collected on federal level, these taxes include an income tax, social security, corporate taxes and value added tax. At the local level, property taxes as well as communal taxes are collected. Tax revenue stood at 48% of GDP in 2012.

Taxation in Malta is levied by the State and it is administered by the Commissioner for Tax and Customs. The total tax revenues in 2014 amounted to €2.747 Billion, which represents 34.6% of the Maltese GDP. The main sources of tax revenue were value-added tax, income tax, and social security contributions.

<span class="mw-page-title-main">Value-added tax</span> Form of consumption tax

A value-added tax (VAT or goods and services tax (GST), general consumption tax (GCT)), is a consumption tax that is levied on the value added at each stage of a product's production and distribution. VAT is similar to, and is often compared with, a sales tax. VAT is an indirect tax because the consumer who ultimately bears the burden of the tax is not the entity that pays it. Specific goods and services are typically exempted in various jurisdictions.

The organization responsible for tax policy in Ukraine is the State Fiscal Service, operating under the Ministry of Finance of Ukraine. Taxation is legally regulated by the Taxation Code of Ukraine. The calendar year serves as a fiscal year in Ukraine. The most important sources of tax revenue in Ukraine are unified social security contributions, value added tax, individual income tax. In 2017 taxes collected formed 23% of GDP at ₴969.654 billion.

Taxation is an important part in the Turkish economy. Turkey has a 25.5% tax to GDP ratio. Most of the taxes are levied by central government. However some specific taxes are levied by municipalities, with the amount determined by centrally issued legislation. Municipalities have no authority to make their own tax laws.

Kenya's taxation system covers income tax, value-added tax, customs and excise duty. The regulations are governed by independent legislators that govern the taxation system, the main legislator, the Kenya Revenue Authority (KRA) has different sections that deal with the above taxes while also having the authority to undertake reviews on various companies and corporations. The main goal of the system is to enhance tax compliance through simplified and efficient tax administration.

Ethiopia has a long history of taxing its population. As of 2002, reforms have changed the way the tax system works in the nation; these reforms have aimed to centralize tax authority. Currently the nation's federal government lobbies many different types of taxes on its population; these taxes include income taxes on four main schedules, property taxes, and value added taxes (VAT).

References

  1. 1 2 3 4 Your taxes: Tax rates for 2014 - Retrieved 9 September 2014
  2. 1 2 3 Israel Highlights 2014 Archived 2014-09-11 at the Wayback Machine Section - "Personal Taxation", page 2
  3. 1 2 Taxation and Investment in Israel 2012 Section - "3.7 Administration", page 12
  4. ↑ "מדרגות מס הכנסה". כל-זכות (in Hebrew). Retrieved 2024-04-06.
  5. ↑ Israel Highlights 2014 Archived 2014-09-11 at the Wayback Machine Section - "Other taxes on Individuals", page 2
  6. 1 2 Taxation and Investment in Israel 2012, page 9
  7. ↑ "Knesset gives final approval to corporate tax cut - Globes". en.globes.co.il. January 5, 2016.
  8. ↑ "Israel approves new innovation box regime and reduces tax rates". taxinsights.ey.com. Retrieved 2017-10-16.
  9. ↑ Israel Lowered the Value-added Tax, but Consumers May Have Little to Celebrate
  10. ↑ "Israel – VAT rate reduced to 17%".
  11. ↑ Taxation and Investment in Israel 2012 Section 5.1, page 15
  12. ↑ VAT hits 18% high for third time in Israel's history
  13. ↑ Israel Highlights 2014 Archived 2014-09-11 at the Wayback Machine Section - "Value added tax", page 3
  14. ↑ "Imported Goods Taxes and Levies 2020". Zipy 2020-7-29.
  15. ↑ "Bloomberg - Are you a robot?". www.bloomberg.com.{{cite web}}: Cite uses generic title (help)
  16. ↑ VAT/GST electronic filing and data extraction Section - "Is electronic filing of periodic VAT/GST returns mandatory or optional?", p. 11
  17. 1 2 3 4 5 6 7 8 Immigration to Israel: Israeli Tax Ramifications and Benefits - Retrieved 9 September 2014
  18. ↑ "Israel - CountryPedia - Papaya Global". CountryPedia - Papaya Global. Retrieved 2020-04-26.
  19. 1 2 3 4 Department of Customs & VAT (5 May 2004). "Notice to the Public: Stamp Tax". The State of Israel. Retrieved 27 November 2017.
  20. ↑ Stamp Tax on Documents: Law 5731-1961, a full text English translation incorporating all changes up to and including September 1, 2003, Haifa: Aryeh Greenfield-A.G., September 2003, LCCN   2004418547, OCLC   54429051, OL   3361544M
  21. ↑ Taxation and Investment in Israel 2012: Reach, relevance and reliability (PDF), Deloitte Touche Tohmatsu Limited, p. 14
  22. ↑ "Israel Corporate - Other taxes". PwC Worldwide Tax Summaries. PricewaterhouseCoopers. 4 April 2017. Retrieved 27 November 2017. Stamp taxes. There are no stamp taxes imposed in Israel.
  23. ↑ "New Israeli Tax Incentive for Foreign Residents". אבי נוב|עו"ד|מיסוי בינלאומי|תכנון מס|מקלט מס|עורך דין|אמנות מס|tax |Israel.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.