Israel is a lot less taxing than it used to be. Here is a summary of Israeli rates and tax brackets for 2019.
By LEON HARRISCalculating taxes(photo credit: INGIMAGE)
BusinessesThe regular company tax rate is 23%.The regular dividend tax rate is 30%-33% for 10%-or-more shareholders; 25%-28% for other shareholders, resulting in a combined tax burden on distributed corporate profits of 42.25%-48.41%, subject to any tax treaty.The VAT standard rate is 17%. Exempt dealers must have annual revenues below NIS 100,187.There are tax breaks for capital gains of foreign resident investors, approved rental buildings, oil exploration and production, movie productions.Real estateHome rental income of up to NIS 5,090 per month is exempt. Thereafter, several possibilities exist.Real estate acquisition tax rates range up to 10% generally. For an Israeli resident purchaser with no other home in Israel, the first NIS 1,664,520 (up to January 15, 2019) may be exempt from acquisition tax.The gain from the sale of an only home in Israel by a resident individual may be exempt from tax provided its value does not exceed NIS 4,455,000 (in 2018). Otherwise, home sales are generally taxed at 25%-28%.IndividualsThe 2019 annual income tax rates for employment and freelance income are as follows:• 10% on first NIS 75,720• 14% on NIS 75,721-NIS 108,600• 20% on NIS 108,601-NIS 174,360• 31% on NIS 174,361-NIS 242,400• 35% on NIS 242,401-NIS 504,360• 47% on NIS 540,361-NIS 649,560• 50% on income over NIS 649,560Passive income from securities are generally taxed at rates of 25%-33%. Special rules apply to rental income.Personal tax creditsIsraeli residents are entitled to personal tax credits that are known as credit points. Each credit point is currently worth NIS 2,616 per year.A man generally receives 2.25 credit points (which reduces tax by NIS 5,886 per year), and a woman receives 2.75 credit points (which reduces tax by NIS 7,194). If a couple both work and opt for separate tax calculations, the wife will receive an extra credit point for each child under 18 years of age, and half-credit point for a child born or reaching 18 in the tax year. The husband receives extra credit points for children aged under six (in 2018).New residentsNew residents and senior returning residents (who lived abroad 10 years) generally enjoy a 10-year Israeli tax exemption for non-Israeli-source income and gains – not work done in Israel. They also enjoy an exemption for 5-20 years regarding interest on patach, foreign-currency time deposits of three months or more at an Israeli bank.On Israeli-source income, new immigrants receive an extra three credit points in the first 18 months after their immigration, two extra credit points in the next 12 months, and one extra credit point in the next 12 months.As always, consult experienced tax advisers in each country at an early stage in specific cases.The writer is a certified public accountant and tax specialist at Harris Consulting & Tax Ltd. leon@hcat.co.
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