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Personal Income Taxes
in Israel
There are several important
classes of income that are tax-exempt.
Income of a Disabled
Person - 100%
The income of a person with a
100% disability or that of a person with a 90% degree of blindness is exempt
from tax to an annual limit of approximately NIS 501,600. This figure is
true of an individual's earned income (salary, business). Passive income or
unearned income (rent, interest and the like) is exempt up to approximately
NIS 60,000 per annum. Allowances
The following allowances are
exempt from tax:
1) An allowance for war injury or for a injury suffered as a result of enemy
action.
2) Disability allowances and old-age pension that are paid by the National
Insurance Institute.
3) Allowances from countries outside Israel that are payable in Israel.
Rent from a
Residential Apartment
In order to encourage the rental
of empty flats while maintaining rents at a reasonably low, in tax year 2005
an exemption is allowed on an apartment rented for residential purposes up
to a limit of NIS 5,595 a month. In 2006 the exemption per month will be NIS
3,770. Profit on the Sale
of an Apartment
The profit from the sale of an
apartment, subject to certain conditions, is, in most cases, tax-exempt.
There are two principles of law that apply to most cases of a tax-exempt
sale of a residential apartment:
1)The sale is of a single residential apartment, that is that you have no
other apartment.
2)If you own more than one residential apartment, you must make sure that at
least 4 years have passed between one sale and another. Prizes, Inheritances
and Gifts
Prizes, such as a win in a
lottery, inheritances and gifts that are received other than as a result of
a business relationship, are tax-exempt in Israel. (Prizes & lottery, only
up to 70,000 IS per year are tax exampt). Severance Pay
An employed person in Israel is
entitled to severance pay at the rate of one monthly salary for each year
that he has worked. The limit of the monthly sum that is exempt from tax is
NIS 9,310. (From 1.1.2003-10,090) If the gross salary, which represents the
basis for severance pay is higher than this, the difference will be taxable.
For example: A salaried employee is fired after 10 years at work.
His last monthly salary was NIS 15,000.
Severance pay due - 15,000 x 10 years = 150,000
Tax-exempt limit - 9,310 x 10 = 93,100
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Taxable difference 56,900 |
