Charitable contributionsThere is a 35 percent tax credit for contributions to Israeli charities approved under Section 46 of the Income Tax Ordinance. In 2010, following a recent amendment, this applied to contributions of at least NIS 310 but no more than NIS 7,636,000. The limits for 2011 are not yet clear.US taxpayers should consider claiming a 25% tax credit for Israeli tax purposes, and a tax deduction for US tax purposes, for contributions to US charities that are “friends of” Israeli charities, under special rules in the US-Israel tax treaty.Disabled people Persons certified as being 100% disabled (or 90% in certain circumstances) for 185-364 days in a tax year are exempt on income of up to NIS 69,480 per year, pro rated by reference to the number of days’ disability.If they are disabled 365 days or more and derive employment or freelance income, they are exempt on income of up to NIS 579,600 per year, pro rated by reference to the number of days’ disability. Interest on money derived from bodily injury compensation is exempt up to NIS 247,680.
Cars for employees The use of a car provided by an employer is taxable (Shovi shimush).The amount taxed depends on the year of purchase and the price of the car as new. For cars purchased before 2010, there are seven car-price groups, and the monthly taxed benefit ranges from NIS 2,580 to NIS 9,950.For cars purchased in 2010 onward, the taxed benefit is 2.48% of the price as new for each model; you can look this up at www.shaam.gov.il/mm-usecar (you will need the product code and model code on the vehicle license).
Other tax limits There are a number of other monetary tax limits. They mainly relate to different types of retirement and savings plans and life-insurance policies, discharged soldiers and certain academic degree holders.National Insurance InstituteThe current monthly National Insurance Institute (Bituah Leumi) rates for Israeli residents, including the health levy, and national insurance (social security), which is also payable at various rates on most types of income up to NIS 73,422 a month (in 2011), are as follows:• Resident employees: 3.5%-12% • Employers of resident employees: 3.45%-5.90% from April 1, 2011 (before then, 3.85%-5.43%) • Nonresident employees: 0.04%- 0.87% • Employers of nonresident employees: 0.49%-0.77% • Self-employed individuals: 9.82%- 16.23% (52% of the NII amount paid is tax deductible) • Not working: 9.61%-12% (52% of the NII amount paid is tax deductible) • Payment if no income: NIS 154 per month.No NII liability applies to monthly income exceeding NIS 73,422. There is also no NII liability regarding dividends and capital gains. But the profits of fiscally transparent “family companies” are assessable to national insurance.Other rates apply to early retirers, domestic helpers and certain others.
Estates, inheritances, giftsThere is no tax in Israel on estate or inheritances. There is also no tax on gifts to Israeli residents. But capital-gains tax is payable at rates of 20%- 45% on:• Gifts to foreign residents except for cash • Sale of assets acquired by way of a gift or inheritance.But specialist advice may be needed to avoid double taxation in Israel and abroad in relevant cases.As always, consult experienced tax advisors in each country at an early stage in specific cases.leon@hcat.co Leon Harris is a certified public accountant and tax specialist at Harris Consulting & Tax Ltd.