The Taxes in Israel
National Insurance applies to the income of both the employed and the self-employed.
The amount paid to the National Insurance also covers medical insurance to the Sick Funds. The rate of the monthly advance payment for a self-employed person amounts to a maximum of 14.2% on a maximum monthly income of NIS 25,388. (In excess of this sum, there is no additional payment to National Insurance).
Customs Duty and Purchase Taxes
Customs duty is imposed on certain products that are imported into Israel. The duty is comparatively high for luxury products such as stereos, televisions and the like. In addition, purchase tax is imposed on a range of goods. Here too, the payment is affected by the nature of the imported item.
Most legal documents are subject to a stamp duty which varies in amount from 0.4 percent to 1 percent depending on the nature of the document. Failure to pay the assessable stamp duty does not impinge on the validity of the legal document, unless payment of the duty is an express pre-condition intrinsically contained in the document. A document for which stamp duty has not been paid, may not be accepted as evidence in a court of law or accepted by official government offices. Stamp duty not paid within thirty days will incur penalties of between 25 percent to 50 percent.
Gifts and Inheritance Taxes
Israel has no inheritance or gift tax. However, on the subsequent sale by the recipient of an asset which is assessable for capital gains tax, the asset cost (net of depreciation where applicable) and acquisition date of the testator or donor are taken into account in the computation of tax due.
In Israel, there is no local tax imposed on income. Nevertheless, the local authority collects taxes according to the area (square meters) of the business.
As has been mentioned, the amount of the taxes are influenced only by the size and area of the business premises and not by its current income.
Real Estate Taxes
There are a number of taxes in Israel that are applied to real estate.
Purchase tax is payable by the purchaser in a real estate transaction. Generally, the tax is between 3.5% and 5%. A reduced tax of 0.5% is payable by an Israeli resident who is purchasing a residential apartment, if it is the only flat he owns. On real estate sales between close members of a family when no money changes hands, purchase tax is 1/3 of the normal rate of tax.
The above tax was introduced on 1.1.2000 and it applies to the vendor.Betterment Tax
The tax is 2.5% of the value of the sale or 0.8% on the sale of a residential apartment by a building contractor.
The sale of an apartment by a private individual is exempt from sales tax in many cases.
When the sale concerns business real estate, or a private apartment that is not exempt from tax, betterment tax is payable. The principles of this tax are very similar to capital gains tax which was mentioned previously.