Lapid looking sharp 370.
(photo credit: Marc Israel Sellem/The Jerusalem Post)
Income tax rate freeze
On November 25, Finance Minister Yair Lapid announced that income-tax rates won’t rise on January 1, 2014, after all. This is thanks to taxes paid by certain companies on “trapped profits,” which were untrapped by paying a compromise rate of tax this month.
In the announcement, there’s no mention of company tax, which is also due to go up from 25 percent this year to 26.5% in 2014. And there is no mention of reducing the rate of VAT, which went up already this year from 17% to 18%. In any case, the tax law will have to be amended by the Knesset.Mom and Pop firms
On another note, one of the injustices of the Israeli tax system has been the inability for spouses to work together in a family business and have their tax calculated separately.
Currently this is only possible if the second spouse (usually the wife) makes approximately less than NIS 48,000 per year. Their income gets lumped together for tax purposes, and they pay more tax than if they worked at totally independent work places.
There have been many court cases on the subject, but the taxpayer couples lost in a test case in the Supreme Court recently. Now a bill has just been presented to the Knesset that aims to give equal tax rights to spouses who work together, in proposed amendment 198 to the Income Tax Ordinance.
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The bill proposes to allow separate tax calculations for each souse from a joint source of income if certain conditions are met: the personal effort of each spouse is “necessary” for producing income from the joint source; each spouse receives income that matches their contribution to the joint source of income directly; if this takes place at the couple’s home, the home serves on an ongoing basis as the source of income for most of the activity.
But there’s a sting in the tail. If the couple overdo it and reduce their tax by 30% too much, a deficiency fine of 30% of the tax at stake may be imposed by the tax-assessing officer. (Don’t assessing officers work with their spouses?) The bill has just passed its first reading in the Knesset. It is supposed to take effect on January 1, 2014.
Wishing all our readers a Happy Hanukka – the above will help.
As always, consult experienced tax advisers in each country at an early stage in specific cases.
email@example.com Leon Harris is a certified public accountant and tax specialist at Harris Consulting & Tax Ltd.
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