Israel Tax Reform for 2013-2014

Tax Rate|Personal Tax|Real estate 

Dr. Avi Nov, Adv. 

June, 2013

The Israeli government is planning various tax hikes and changes according to an economic plan for 2013-2014 published recently. Following, is a summary of the main tax hikes proposals. See also: The Israeli 2013 Economic Arrangements Bill

Personal tax rates

The government proposes to raise all personal income tax rates for all the brackets by 1.5% as of 1 January 2014. In addition to the personal tax, the health tax for high-income earners will be raised by 0.5%, and the health tax exemption granted to housewives will be repealed. Also, a 35% tax on pension plans will be imposed on individuals who earn more than NIS 15,000 per month.

Corporate tax rates

The Israeli government proposes to raise the standard rate of company tax from 25% to 26.5% as of 1 January 2014.

Industry and technology companies

The Israeli government plans certain changes in the Law for the Encouragement of Capital Investments. It is proposed that from 2014, Preferred Enterprises in development area A will pay company tax at a rate of 10%. Other Preferred Enterprises will pay 15% company tax as of 1 January 2014. 

In addition, subject to any applicable Israeli tax treaty, shareholders will pay 20% withholding tax on dividends from any preferred enterprise as of 1 January 2014, instead of 15% now.

Value Add Tax

Israeli Finance Minister Yair Lapid signed a decree on Tuesday to raise the standard Value Added Tax (VAT) in the country from 17 to 18 percent from June 2. This measure is part of the state Budget for 2013-2014.

Real estate

The Israeli government proposes that an individual who owns more than one home in Israel will lose the present exemption from land appreciation tax upon a sale. In such case, a 25% tax will be levied from 2014. 

In addition, it is proposed to tax gains where the sale price of the Israeli real estate exceeds NIS 5 million. Also, it is proposed to cancel foreign residents' sale exemption. However, this cancellation may be unlawful according to the anti-discrimination article in Israel’s tax treaties.

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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