Ask Miriam, the tax expert

Vol XXIII: When I make Aliah, when should I start to pay income taxes regarding to financial investments I do not bring to Israel?

By JERUSALEM POST STAFF
tax88 (photo credit: )
tax88
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For Red Tape resources click here. Miriam Vilner is a licenced CPA (Isr.), a member of the Institute for Certified Public Accountants in Israel and a qualified Arbitrator registered with the Ministry of Justice. She holds degrees from London University and the Weizman Institute Send us your questions >> * * *
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  • Volumes XIV - XIX * * * Vol XXIII Q: When I make Aliah, when should I start to pay income taxes regarding to financial investments I do not bring to Israel? A: Thank you for your e-mail. A new immigrant is exempt from income tax on passive income earned from assetts held abroad, both prior to and after Aliya for 5 years. However, you are required by law to declare this income in a yearly report - in the section dealing with exempt income. There is a special shortened form for this type of report. We can offer you a booklet which deals with the Tax Reform (updated 01/01/2007 ) The booklet deals with various exemptions including new immigrants and returning residents. It sells for $35 or 150 Nis including postage. Good Luck Miriam Vilner C.P.A. (Isr.) 03-5343727 050-4564049 Q: I visited Israel in June and submitted 3 tax VAT forms at the airport. It is now well over a month later and it has still not been credited on my charge card. How long should I expect to wait for these credits? A: Thank you for your e-mail. Sorry I have no idea, I have never requested a V.A.T. return in Israel. However, when I requested one in England, it took over 6 months to arrive, then it goes (in Israel) to the bank who take at least half in charges. Hopefully, this won't happen in the US Miriam Vilner C.P.A. (Isr.) Q: I have 3 questions regarding a 2005 Honda Odyssey van. My wife and family are considering moving to Israel for 1 year in 2009. We own a home in Yad Binyamin. We own the above named vehicle. 1)As a tourist can we bring our vehicle for the year without going through the same issues as a new oleh? What would be the cost to ship to and from Toronto, Canada? 2)Let's say we brought it for the year and decided that we were going to make aliyah, could we just do whatever is necessary to lisence the car in Israel or would we have to ship it back to Canada and bring it back as a oleh? 3)If we brought it today what EXACT costs would be involved including the taxes we would pay as olim chadashim. A: Thank you for your e-mail.Sorry but import duty on vehicles and otherwise is not the field of a C.P.A. You have to contant the Customs authority independently or through Nefesh BeNefesh or the jewish Agency emissiary. All I can offer you is my booklet which deals with the Tax Reform updated 01/01/2077 in the field of Income Tax (only). The booklet deals with various exemptions including new immigrants and returning residents. It sells for $30 or 130 Nis including postage. Good Luck Miriam Vilner C.P.A. (Isr.) 03-5343727 050-4564049 * * * Vol XXII Q: I live in Israel and had 3 jobs in 2006. (I worked for a software company for 6 years. They had budget cuts and let me go. I started working for another company and, after 6 weeks, realized that they misrepresented what they did for their clients so I quit. I subsequently found another job, which I enjoy very much.) Should I hire an accountant to deal with the Hechzer Mas (getting a tax refund) or should I just go to the Mas Hachnasah office and tell them about the 3 jobs in 2006 and trust them to refund the correct amount? A:Thank you for your e-mail. But I must say you must be joking. The Income Tax will not refund a penny without proper documentation, which means a tax rebate report, it's called 9.1 If you send me your three 106 forms which your employers were obliged to give you by 31/03/07, I will check if and how much refund you can get. My fee for a refund report is 15% of the refund(minimum 400 NIS) + V.A.T. My fax number is 03-5345637 but it isn't too reliable so also make photocopies and send to Miriam Vilner C.P.A. (Isr.) P.O.Box 2348' Savyon 56508 I will check it out without obligation. Q: I am looking for an Israeli income tax schedule in English. Specifically, how much tax is owed at what levels of income? If I work 6 months in a calendar year and tax is taken out at 29%, and I am unemployed the other 6 months of that year, how much of what was with held do I stand to get refunded? Thank you. A:Thank you for your e-mail. I'm afraid I don't carry tax tables in my head and to work out your tax liability, I would need to see all your 106 forms and unemployment payments you may have received from Bituach Leumi. If you are talking about the year 2006, you are welcome to send these documents, without obligation. My fax number is 03-5345637 but it isn't too reliable so also make photocopies and send to Miriam Vilner C.P.A. (Isr.) P.O.Box 2348' Savyon 56508 You can receive tables of tax deductions from the Income tax Authority closest to you or click here for the Ministry of Finance website. Q: Is it true that returning residents and new immigrants have a five year amnesty on all tax and investment income prior to the point of entry into Israel . I was told this was the law but am still being sent tax bills. Is it the law or isn't it the law? A:New Olim and returning residents have a number of tax exemptions but not a total "amnesty". Salaries and businesses have concessions but not exemptions, likewise pensions from abroad. Investments held prior to Aliya do have total exemption. I have available a booklet on The (now not new) Tax reform and how it affects new immigrants and returning residents. It cost 120 NIS or $25. If you still have problems, we can arrange an appointment and I will check out why you are paying more tax than you should. The first hour is free. Miriam Vilner C.P.A.(Isr.) www.lesstax4u.co.il - hit the English button 03-5343727 050-4564049 * * * Vol XXI Q: Dear Miriam, I expect soon to become the recipient of a Teachers Pension from the UK, and also of a UK state pension. I also expect soon to become a 'toshav hozer. Where will my pensions be taxed? And what about my cash savings? Will they be taxed in UK or Israel? Many thanks. A: As a toshav hozer, you have a five year tax exemption on your teacher's pension, after which you would pay tax on your pension but would probably be exempt on 35% as is customary for Israelis who contributed to the pension fund over the years and did not receive severance pay in addition to their pensions. There is an alternative to this course of action; you may pay tax in England from the day you return to Israel, not take advantage of the 5-year exemption but continue paying tax in England for the rest of your life. According to paragraph 9G of the Income Tax Ordinances, you cannot be charged more tax in Israel than you would pay in the country where you received your pension. This law is especially useful for olim from the USA where it is possible to decide voluntarily how much tax you will pay in a certain year. Re: England, you have to make your own calculation which alternative saves you the most money. Regarding your savings, there is a 5-year exemption on tax on unearned income. This does not include capital gains, dividends and interest derived from the stock market. I have available an updated version of my booklet on the Tax Reform and how it affects new immigrants and returning residents for $30 or 120 NIS. Regarding the State Pension: Actually I don't know what you mean. If you mean National Insurance then it is exempt by paragraph 14 of the Income Tax Ordinances. There is a slight problem with this paragraph with respect to British National Insurance as, unlike US Social Security, it is theoretically liable for tax in England. However, the subject has never been raised at any forum I have been to or in any publication. We hope that sleeping dogs continue "to lie." For any other pension the same rules apply as to the Teacher's Pension. Q: I heard that if you sell your house in the US after you move to Israel then you have to pay taxes in Israel on the sale. We are planning to rent our house the first year after aliya, then once settled we will sell. Is it true that we would have to pay taxes on it in Israel? A: If you are a new immigrant, then assets held abroad prior to your becoming an Oleh, are exempt from capital gains tax for 10 years after making aliya. I have available an updated version of my booklet on the Tax Reform and how it effects new immigrants and returning residents for $30 or 120 NIS. Good Luck. * * * Vol XX Q: My wife and I are Israelis. I am also a Canadian. We left Israel in October 2005 because we had no work. We want to return to Israel. We have kept up on bituah leumi. Do we have to file any income tax forms in Israel to report our income while we are in Canada? A: You are not considered a returning resident as you have not been out of the country long enough. If you have a file with the Income Tax Authorities in Israel previous to your departure, then you have to report on the years you were out of the country. If you don't have a file, then I think you can let sleeping dogs lie, unless you are specifically asked to report. If you are keeping investments or a bank account abroad, then yes you should report them. There is a special shortened form for this situation, unless the investments are very large. More specifically: 2005 - you would be considered Israeli residents and similarly if you return in 2007. If you had a business in these years, then you should have a file with the authorities - income tax and VAT and report. If you didn't have a business, then all that is relevant is whether you had a bank account or investments abroad. 2006 - this is difficult to answer without my knowing more about you. I cannot decide whether the Income tax Authorities would consider you as a resident or not. For instance: Did you sell your apartment or let it for the period you were abroad? Did you close your bank account? If you would be considered as temporarily abroad, then -yes, legally you are required to report income from abroad, (we can help you with this) but if you could claim non-residency, then you are not obliged. The whole subject of liability occurring because of residency is not defined in absolute terms and is subjective, not objective. Q: Dear Miriam: An Oleh Chadash co-owns an apartment with another member of his family, in his home country, since several years before making aliya. Is there any tax due for the Oleh Chadash in concept of this apartment ownership? Since when? For how long? If it is a co-ownership, how will the tax due be calculated, if there is any? Thanks for your answers. A: Thank you for your e-mail. There is a five-year exemption on unearned income, including rentals, abroad. Providing the asset was held outside Israel both prior and following aliya. After five years, you will be taxed at your regular tax rate and credited with tax paid abroad or 15% of the gross income. In the first case, expenses may be deducted, in the second case only depreciation. I have available a revised edition of my booklet on the Tax Reform and the rights of new immigrants and returning residents for 120 NIS or $25. Miriam Vilner C.P.A. (Isr.) *** I have available a booklet on the (now not so) new Tax Reform which outlines the various tax rates and exemptions for 120 NIS or $25. Miriam Vilner B.Sc. (Lond.), M.Sc., C.P.A. (Isr.) 03-5343727 050-4564049 Fax: 03-5345637 e-mail miriamcpa@012.net.il * * * Cafe Oleh experts have been chosen for their knowledge and reputation. Cafe Oleh does not take responsibility for any advice they offer. Click here to send us your questions for Miriam.
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