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Ron Zalben CPA (US/Israel)  Binyamin Radomsky, CPA (Isr), ACA (UK) Cross-border taxation is one of the most complex and confusing areas of life, and affects more and more people with generations of families living in different countries. This is a particular issue for those living in Israel with family elsewhere in the world who are trying to plan their affairs for later in life. There are plenty of stories of Israelis paying exorbitant amounts of tax due to well-meaning plans made by families abroad who forgot to take into account the Israeli taxation. Whilst Israel – in contradistinction to many other Western countries

The Israel Tax Authority in February published a circular draft clarifying the classification of income from residential units. The circular explains the considerations according to which the income from residential units should be considered income from business, rather than passive income (private income entitling the landlord to potentially lower tax rates). Based on the current draft: Leasing 10 or more residential units constitutes a fully taxable business according to the Tax Authority, with tax rates up to 45-50 percent Individuals leasing 5-9 residential units will have to convince the Israel Tax Authority that they should be granted the passive income rates, after

The State of Israel grants a tax benefit to new immigrants and returning residents. The purpose of the benefit is to encourage potential “Olim” and Returning Citizens of Israel to make Aliyah. The benefit is valid for 10 years it grants an exemption from reporting and paying tax on income and assets from abroad. It is valid for all types of income that originates outside of Israel except for: salary, dividends, interest or royalties, capital gains from the sale or rental of a business or real estate abroad.   Who is entitled to the benefits of a new immigrant? An individual who was

Every year, each employee is required to complete a Form 101 for each place of employment and return it to the person in charge of salaries. Although this form should technically be filled out on January 1 (for continuing jobs), on a practical level it is sufficient to complete it before the January salary is processed. If your employer doesn’t give you one, you can download a blank Form 101 from the tax office here. Below is a short guide to filling in Form 101 for the 2018 tax year. Section א Employer’s details: This section will be completed by the employer. Section ב Employee Details: Including teudat zehut number,

With the end of the tax year fast approaching, here are a few action items that may be relevant. For Individuals If you haven’t already done so, make a claim for the Working Tax Grant (negative income tax) in respect of 2016 income. The deadline is December 29. If you pay Bituach Leumi without using a standing order, pay by the end of the year to receive the deduction for tax purposes. Those paying on standing order will have the January payment included in the 2017 certificate. Make donations to recognized charities (section 46), and ensure the receipt is dated 2017. Start collecting information for “short” tax returns, if

In the new year, Israel’s governmental authorities will be implementing automatic trades of tax information with other countries, known as the Common Reporting Standard (CRS). In anticipation, the Israeli Tax Authority is offering taxpayers the opportunity to voluntarily disclose previously unreported assets and income. In exchange for volunteering this information and paying the proper owed taxes on the income, people will be able to avoid prosecution for tax evasion. The disclosure facility is available until the end of 2019. The Israeli government successfully recovered NIS 3 billion in unpaid tax revenue during the last period for voluntary disclosure, which ran from

Kahlon’s plan removes the import duty on children’s clothing, cellular phones and shoes. Finance Minister Moshe Kahlon introduced a new tax plan for working parents in 2017. The plan, passed on May 10, 2017, by the Knesset, is intended to increase the net income for families. The plan takes effect retroactively to January 1, 2017. A major portion of the plan is additional tax credits for working parents. Other elements include subsidies for after-school education frameworks, higher income supplements for low-income earners, and import tax cuts on children’s clothes, shoes and cellular phones. Credits for Young Children Under the new plan, tax credit points for parents will

The Working Tax Grant eligibility criteria include additional benefits for parents with children. The Employment Grant Program (previously named “negative income tax” or “working tax grant”) is intended to encourage participation in the workforce for low income earners, to increase the disposable income of those employed at the lower income brackets and to reduce income inequality. In April 2017, eligibility for the grant was expanded by Finance Minister Moshe Kahlon. All figures regarding criteria and grant amounts are based on the last published results. Revised figures are expected in July 2017. Who Is Eligible? The law applies to any salaried employee

As part of the 2017-18 Budget, the government required that, as of the 2017 tax year, those who are self-employed are required to pay into an Israeli-recognized pension plan. The amounts required by law are as follows (for 2017): Monthly  profit (NIS) Yearly profit (NIS) Percentage contribution required Max. required monthly contribution (NIS) Max. required yearly contribution (NIS) On portion from NIS 0 – 4,836 On portion from NIS 0 – 58,038 4.45% 215 2,583 On portion from NIS 4,836 – 9,673 On portion from NIS 58,038 – 116,076 12.55% 607 7,284 On portion above NIS 9,673 On portion above NIS 116,076 0% 0 0 For example: A freelancer whose annual profit is NIS 45,000 must contribute at least NIS 2,003 into a

Proceed with caution! Are you sure that your income will fall under Israel’s 10-year tax exemption? One of the most crucial parts of an Aliyah plan is for employment after arriving in Israel. Arriving with a signed job contract in hand, however, is extremely unusual. One possibility to ease the transition to working in Israel is keeping your current job. While this continuity can provide a boost to both your bank account and your morale, there are important tax questions that must be addressed – and the ideal time to do this is before you move. Israeli Income Tax and the 10-year

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