Holocaust survivors’ Israeli tax rights

As always, consult experienced tax advisers in each country at an early stage in specific cases.

Calculating taxes (photo credit: INGIMAGE)
Calculating taxes
(photo credit: INGIMAGE)
Ahead of the Fifth World Holocaust Forum on January 23 in Jerusalem – attended by US Vice President Mike Pence, Russian President Vladimir Putin, French President Emmanuel Macron, Prince Charles and many other heads of state – the Israeli Tax Authority (ITA) published a useful summary of tax rights for Holocaust survivors living in Israel.
The forum marks the 75th anniversary of the liberation of Auschwitz-Birkenau, and International Holocaust Remembrance Day.
The ITA summary published on January 22 includes the following.
Disability tax break
If disability of 90% or above according to a special formula is determined for an individual under the Nazi Persecution Law or the Law For The Disabled From The War Against The Nazis, that individual is entitled to an income tax exemption up to prescribed limits (see below). If the individual already paid tax without receiving the exemption, they can claim a tax refund for tax going back up to six years. If the individual is not confirmed as disabled under one of the above laws, they can get confirmation from a special medical board operated by the National Insurance Institute.
You then apply to the ITA for exemption on tax form 169 Alef and attach the relevant disability confirmation as well as tax form 169 Bet waiving medical confidentiality for the ITA (ask your family doctor about this).
An exemption is also available for disability allowances paid by foreign governments to Holocaust survivors, disability allowances paid by the Israeli government to victims of Nazi persecution, and social security received by Israeli residents from foreign state authorities.
Moreover, exemption is also available for interest income on savings plans or foreign currency deposits derived from compensation, allowance or disability allowance (following Nazi persecution, World War Two orphans, etc.).
The prescribed exemption limits
Some disabled people are still able to work and earn income. The exempt earned income annual limit (e.g. salary, business, pension/allowance) is up to NIS 618,000 in 2020 if disability is determined at 90% or more for over 364 days. For 185-364 days of disability, the exempted earned income limit is up to NIS 74,040.
If the individual has earned income under NIS 74,040, unearned income of up to NIS 74,040 may also be exempt.
The limit for interest on interest from a deposit derived from compensation or insurance for bodily harm is NIS 304,560.
These limits are prorated if the disability period is less that stated above. Slightly lower limits applied in prior years before 2020. These rules are complex, specific inquiry is advisable.
Real estate tax relief
Individuals with permanent disability of 19% or more according to the Law For The Disabled From The War Against The Nazis, and individuals with permanent disability of 50% or more according to the Nazi Persecution Law who are entitled to payments from the state, may receive relief from purchase tax when buying a home or land to build a home in Israel.
The concessionary purchase tax rate for such disabled persons is 0.5%. But if this is the individual’s only home and was purchased on or after December 6, 2016, for up to NIS 2.5 million, the individual can enjoy a 0% rate on the first NIS 1,744,505 (in 2020) under general rules for all Israelis, and 0.5% on the remainder. If the purchase price is above NIS 2.5 million, the 0.5% purchase tax rate applies to the entire price. This relief may be claimed twice in the individual’s lifetime.
Other detailed rules apply and each individual should check out what is best for them in their case.
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 Horoviz Consulting & Tax Ltd. [email protected]