“ותשובה ותפילה וצדקה מעבירים את רוע הגזרה”
(Mussaf, Yamin Noraim)
It is no surprise that, given the time of year, charities in Israel are making a concerted effort to raise funds.
As an added incentive to donate, the tax law gives a credit against the tax bill for donations made during the year.
There are a number of conditions that must be met though:
(1) The charity must be recognised by the tax authorities for donation purposes under section 46 of the tax law. You can check whether any particular organisation is indeed registered here (you will need either the formal name of the charity, or their 9-digit ID number which starts 58xx).
(2) The donation must be proved by way of an original receipt, which needs to state that the monies were indeed a donation (and not, for example, membership or the cost of a dinner). The receipt should also state that the organisation is recognised under section 46.
(3) Over the course of the year, at least NIS 180 is donated (in total).
The credit given is 35% of the amount donated. For example, if NIS 1,000 is donated over the course of the tax year, NIS 350 is knocked off the tax bill.
Whilst it is generally not relevant to most people, there is an upper limit to the amount of donation that you can get credit for. This is the lower of the following:
(1) NIS 9,130,000 worth of donations.
(2) Donations exceeding 30% of the taxpayer’s annual taxable income.
Excess donations from one year can be carried forward to be used in the next three tax years.
For most people, the only way to claim these credits will be by filing a tax return and including the donations therein. However, a scheme was introduced last year whereby the largest employers can grant their employees the credit provided that certain conditions are met. Best to ask your HR/salary department if they can do this for you.