Dr. Avi Nov, Adv.
The Israeli tax system has been subject to various changes recently. The following summarizes Israeli tax rates and other tax information for 2013. For past years, see: Israel Tax Highlights.
Value Added Tax
The standard Israeli Value Added Tax (VAT) rate is 17%. Certain dealers may be exempt from Israeli VAT, but should have annual sales below NIS 77,993.
Real estate home rental income of up to NIS 4,980 per month is exempt for individuals provided that the income is not considered to be derived from real-estate business.
Personal income tax
In 2003, the monthly tax rates in Israel for employment and freelance income are as follows:
· 10% tax on income up to NIS 5,280
· 14% tax on income of NIS 5,281-NIS 9,010
· 21% tax on income of NIS 9,011-NIS 14,000
· 31% tax on income of NIS 14,001-NIS 20,000
· 34% tax on income of NIS 20,001-NIS 41,830
· 48% tax on income of NIS 41,830-NIS 67,630
· 50% tax on income over NIS 67,630.
· 25%-27% tax if the recipient holds under 10% of the payor;
· 30%-50% tax if the recipient holds 10% or more of the payor.
Tax credit for charitable contributions
There is a 35% tax credit for contributions to Israeli charities that were approved under Section 46 of the Israeli Income Tax Ordinance. The credit applies to contributions of at least NIS 180 but no more than NIS 9,130,000 and no more than 30% of taxable income.
The current National Insurance monthly rates for Israeli residents, including the health levy, payable at various rates on most types of income up to NIS 42,435 a month, are as follows:
· Resident employees: 3.5%-12%;
· Employers of resident employees: 3.45%-6.5%;
· Nonresident employees: 0.04%-0.87%;
· Employers of nonresident employees: 0.49%-1.69%;
· Self-employed individuals: 9.82%- 16.23% (52% of the amount paid is tax deductible);
· Not working: 9.61%-12% (52% of the amount paid is tax deductible).