New Tax Rates in Israel

Personal| Income| Law

Dr. Avi Nov, Adv.
August, 2012 

The Israeli Knesset passed the Law for Deficit Reduction and Tax Burden Shifting (Legislative Amendments) recently. The new legislation increases the Israeli tax rates for middle and higher annual incomes. The following describes the main changes in the Israeli tax burden. The new changes in Israeli tax rates make Israel's tax burden among the highest in the west.

For an update of Israeli tax rates, see: Israel tax highlights

Personal income tax
The new tax rates, commencing January 1, 2013, are as follows:
NIS 0 to NIS 62,400 per year: 10 percent
NIS 62,400 to NIS 106,560: 14% (unchanged)
NIS 106,560 to NIS 168,000: 21% (unchanged)
NIS 168,000 to NIS 240,000: 31%
NIS 240,000 to NIS 501,960: 34%
NIS 501,960 to NIS 800,000: 48% (unchanged)
Over NIS 800,000: 50%

(Around $200,000)

National Insurance Institute
Israeli employers will pay higher rates of National Insurance payments (social security). The maximum rate employers pay will increase from 5.9% in 2012 to 6.5% in 2013, 7% in 2014 and 7.5% from 2015.

Personal investment
The new law increases the Israeli tax rates (a 2% surtax) on capital-gains tax and land-appreciation tax on inflation-adjusted capital gains, dividends and interest in 2013 onward, as follows:

· 32% (instead of 30%) for shareholders holding 10% or more of any means of control of the company

· 27% (instead of 25%) in other cases.

However, in the case of residential property in Israel, the 2% surtax will only apply if the selling value exceeds NIS 4 million and no exemption applies.

Value-Added Tax
In addition to the new personal income tax rates, an order was issued recently raising the standard rate of VAT from 16% to 17% commencing September 1, 2012.

Company Tax
No changes, meanwhile, to taxes paid by companies (25%).
 

Dr. Avi Nov Law Offices, Israeli & international tax law 
*This article is intended for informative purposes only and is in no way to be construed as tax advice or a legal opinion

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