Bituach Leumi for self-employed
In the same way that employees are required to pay Bituach Leumi on their salary, so too is a self-employed person required to pay Bituach Leumi on their earnings (profit). The boundaries for the lower and upper levels of tax are the same as for employees, but the percentages to be paid are higher. This is partly due to the tax reduction available for payments of Bituach Leumi for those who are self-employed, and also because there is no employer contributing for this income. There are also different categories of self-employment at Bituach Leumi. These affect both the amounts that you pay
Setting up a self-employed business
Co-written with Rifka Lebowitz Rifka is a personal and business financial consultant, Visit Rifka’s site at www.rifkalebowitz.com Thinking of opening a small business? For many this is a dream to do what they love, but the bureaucracy can seem overwhelming. So we have written out the steps you need to take with the three government offices. It’s not that hard and can be done via a professional or you can do it yourself. We have sent many new Olim to do this themselves at the various government offices and most have come back successful. You’re starting to go into business, and have decided to start out
Form 101 for employees – 2014 version
Please feel free to join the Facebook group linked to this blog – search for “Tax in Israel” As previously discussed, all employees are required to fill in form 101 for each place of employment, and give it to the person in charge of the salaries. Technically, this needs to be filled in on the 1st of January (for continuing jobs), but for practical reasons it’s sufficient to have it filled out before the January salary is processed. If your employer doesn’t give you one, you can download a blank form from the tax office here. Below is a short guide to filling in the form
Deductions ניכויים for income tax purposes
As we described in an earlier post (see here), certain deductions can be claimed, even if they are not direct business expenses. This post will look at some of these in greater detail. The tax saving for the deduction allowed will depend on your marginal rate of tax, including Bituach Leumi (if you’re self-employmed). Disability insurance ביטוח אובדן כושר עבודה You are able to take out insurance that will pay you a monthly “salary” if you are forced to stop working for a period of time due to certain health issues (check with your insurance agent for precise details). The premiums paid are tax-deductible,
The Capital Statement
Tax authorities around the world like to use a “standard-of-living” test to assess whether taxpayers are declaring all of their income. Essentially, someone with a low earning should not be living in a mansion – unless there’s some sort of decent explanation e.g. inheritance. In Israel, the system is more formalised with the tax office asking taxpayers to produce a statement of their assets and liabilities worldwide on a periodic basis. The idea is to compare the overall movement between the two statements with reported income and known or expected expenses (e.g. taxes, regular living expenses, one-off large expenses such as
Are you entitled to a tax refund?
In a previous post, we considered who was required to file a tax return. However, it could be that even if you are not required to do so, it will be on your interests – if you are due a refund. Any refund due to you is given back with the addition of interest (4% per annum) and linkage – all tax free. You can’t get anywhere near that in the banks these days, and even the most successful investments would be hard-pressed to give you such a favourable post-tax return! You are able to apply for refunds – which necessitates filing a
Taxation of property income
A very common investment for people is property, i.e. receiving rental income. For these purposes, property income refers to income from any type of property (rents), including land (i.e. ground rent). This post will not deal with gains made on the sale of any property. For tax purposes, the nature and place of the property affects the way tax is levied in Israel. Israeli properties Residential properties As part of government housing policy, there are a number of tax-breaks and schemes available to those who have rental income from residential property in Israel – i.e. the property is being used to live in (rather than for business purposes). If your
Taxation of employment income – part 6 – Bituach Leumi
In addition to Income Tax, Israel levies Bituach Leumi (National Insurance or Social Security) on earned income (and certain passive incomes). To all intents and purposes, this is another tax, although there are certain social benefits that accrue from making regular payments (e.g. maternity pay, disability pay, pension etc). Bituach Leumi is calculated on a monthly basis, not on a yearly basis. There are also virtually no exemptions for salaries. There are two rates for Bituach Leumi. The lower rate (3.5%) is for salaries of up to NIS 5,297 per month. Salaries above this amount, and up to NIS 42,435 are taxed at the
Taxation of employment income – part 5 – pension contributions and severance pay
In the previous post, we mentioned that a portion of employer contributions towards an employee’s pension scheme is not treated as a taxable benefit. In this post I will set out, in short, some of the laws regarding pension and severance pay. It is important to start this post by discussing the concept of “base salary – שכר יסוד.” As implied, this is the gross salary that you earn each month before any additions. In some professions, this can represent a relatively small part of the salary; the main salary is then bolstered by commissions, overtime pay etc. Since 2008, the law has required
Taxation of employment income – part 4 – employee benefits
Lorem ipsum dolor sit amet, consectetur adicing elit ut ullamcorper. leo, eget euismod orci. Cum sociis natoque penati bus et magnis dis.Proin gravida nibh vel velit auctor aliquet. Aenean sollicitudin, lorem quis bibendum auctor, nisite elit consequat ipsum, nec sagittis sem nibh id elit. Duis sed odio sit amet nibh vulputate cursus a sit amet mauris et. Morbi accumsan ipsum velit. Nam nec tellus a odio tincidunt auctor a ornare odio. Sed non mauris vitae erat consequat auctor eu in elit.
