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Three New Double Taxation Treaties February 2010 Three new double taxation treaties entered into force on 1.1.2010. The DTAs are with Vietnam , Estonia and Taiwan. Israel Tax Rates 2010 January 2010 Israel has dropped the income tax rates by 1%. From 1.1.2010 the new corporate income tax rate is 25%, compared to 26% in 2009 . The top marginal personal income tax rate is 45%, compared to 46% in 2009. From 1.1.2010 the new standard V.A.T. rate in Israel is 16%, compared to the previous 16.5% rate. Israel Online Tax Returns Filing September 2009 According to amendment no. 161 of the Israeli Tax Law from 20/10/2009 onwards individuals filing their tax returns must file it online. The online filing relates to 2008 annual tax returns. 2008 tax returns filed before 20/10 2009, or returns relating to 2007 or previous years can still be filed manually. Israel New Social Security Ceiling August 2009 The monthly ceiling for social security payments was doubled from the previous IS 38,415 to IS 76,830. The change effecive from 1.8.2008 to 31.12.2009 relates to both employees and self employed. The new ceiling creates an effective 58% tax rate, 46% income tax and 12% social security on monthly income exceeding IS 37,000. Many self employed earning more than IS 22,000, about $5,500, per month are expected to transfer some of their activities to new formed companies,by receiving dividend income which is tax exempt from social security payment. Israel Budget 2009-2010 May 2009 The Israeli government approved on May 13, 2009 the budget for 2009-2010, including some significant tax changes. From 1.7.2009 the standard V.AT rate would rise from the current 15.5% to 16.5% .For the first time in Israel, the 16.5% V.A.T rate would be also imposed on sale of fruit and vegetables. The ceiling for social security payments by individuals would rise from the current IS 40,000 to the new IS 60,000 ceiling. Starting 1.1.2010 the corporate tax rate would be reduced from the current 26% rate to 25% .The top marginal income tax rate for individuals would be reduced from the current 46% rate to 44%. The budget also includes a flat 6.5% reduction in the budget of all ministries and some additional measures. Israel Tax Rates 2009 January 2009 From 1.1.2009 the new corporate tax rate in Israel is 26%, compared to 27% in 2008. The top marginal income tax rate for individuals is 46%, compared to 47% in 2008. There are also new 6 tax brackets for individuals of 10%, 15%, 23%, 30%, 34% and 46%. V.A.T rate for 2009 remains the same as in 2008, 15.5%. In 2009 industries and hotels can deduct 50% accelerated deprection for assets bought between 1.6.2008 to 31.5.2009. The scope of tax grants (negative income tax )covers in 2009 certain low earning employees and self employed. There are also new tax benefits to newcomers and returning residents to Israel. V.A.T for Service Suppliers December 2008 The Israeli parliment confirmed on December 15, 2008 new V.A.T. regulations regarding service suppliers. According to the new legislation for 2009 service suppliers having an annual turnover of less than IS 15 millions will file a bi-monthly V.A.T. report, instead of the current monthly reporting. Currently about 75% of the V.A.T. payers file a bi-monthly report. After the new amendment the number will increase to 85%, about 380,000 tax payers. An additional amendment enables service providers, who till now had to issue invoices when performing the service, to issue invoices only when they actually receive the payment for their sevices. Both amendments are expected to help the cash flow of many Israeli businesses. Donations Tax Credit December 2008 The Israeli tax authority published on October 12, 2008 the updated figures regarding donations to public non-profit organisations. The new ceiling for donations is I.S. 4,208,000, compared to the previous ceiling of I.S. 4,013,000. The new minimum donation eligible to tax credit is I.S. 400. Israel to reduce Income Tax Rates June 2008 The Israeli finance minister presented on June 11, 2008 his plan to reduce both, Israel corporate tax and personal income tax rates. The current Israeli corporate tax rate of 27% would be reduced to 25% in 2009. From 2010 to 2014 the rate would be reduced by 1% each year, down to 20% in 2014. The top income tax rate for individuals, currently 47%, would be reduced to a top marginal rate of 42% in 2014. Other lower personal tax rates, currently 10% to 35% would also be reduced each year, starting 2009 to 2015. The tax cut would be financed by imposing tax on employees receiving employer's contribution to advanced training funds from 1.1.2009. Currently such contributions are excluded from the employee's taxable income. 2008 Income Tax Rates January 2008 From 1.1.2008 income tax rates for individuals are 10%-47%, compared to a top marginal tax rate of 48% in 2008. Israel's coporate tax rate for 2008 is 27% , compared to 29% tax rate in 2007. The VAT rate for 2008 remains the same as in 2007, 15.5%. In 2008 new double taxation treaties with Croatia, Ethiopia and Belarus will come into force. Negative Tax Reform in Israel December 2007 The Israeli parliment approved on 18.12.2007 a new negative income tax reform. According to the reform , taxpapayers earning low income, but more than IS 1,730 per month, will get a cash grant paid directly by the government. The grant is given to earners aged 23 years or more, having at least one child aged under 18. For earners aged above 55 years, the grant is given for children above 19 years too. The monthly grant starts from IS 400 per a single parent, up to IS 800 per couple. The tax reform for employees is effective from 2007, at first covering only an area of about 20% of Israel. By 2009 the reform would cover all the population. For self employed people the reform would start in 2008, as a tax credit brought forward for the next years. Israel Taxes January 2007 From 1.1.2007 Israel's corporate tax rate is 29%(previous rate-31%). The top marginal income tax rate for individuals is 48%(previous rate-49%). According to Israel's new tax regulations there is a list including 12 types of transactions requiring advanced reporting by taxpayers to the Israeli Tax Authority. The reporting should include names of the sides related and the sum of the transaction. The list includes, among others, payment of management fees of over I.S. 2 millions, resulting in tax reduction and sale of asstes to close relatives priced over I.S 2 millions, resulting in a loss setoff within 2 years from the date of sale. The reporting is effective for transactions dated 1.1.2007 onwards. Israel V.A.T June 2006 The Israeli finance minister announced on 18.6.2006 a new v.a.t. rate of 15.5%, replacing the current rate of 16.5%. The new V.A.T rate would be effective from 1.7.2006. Israel Income Taxes January 2006 From 1.1.2006 the corporate tax in Israel is 31% (previous rate-34%). The capital gain tax for individuals, including sale of shares, is 20%. Israel Tax Authority January 2006 From 1.1. 2006 Mr. Jacky Matza is the new director of Israel's Tax Authority, replacing the former director , Mr. Rob. Israel Income Taxes 2005 September 2005 The Israeli parliament approved on 13.9.2005 new regulations for accelerated depreciation. Machine and equipment bought from 7/2005 to 9/2006 would have 100% accelerated depreciation, instead of the general rates. The depreciation rate relates to investment in the sectors of industry, building, agriculture and tourism. Israel Tax Reform July 2005 The Israeli parliament approved a new tax reform. The main amendments are mentioned in our "MAY 2005" tax update. Income Tax in Israel July 2005 Israel's tax authority proposed to impose tax on trusts when both, the beneficiary and the creator of the trust, are Israeli citizens. Tax Reform in Israel May 2005 Israel's finance minister, Benjamin Netanyahoo announced new tax reform for the years 2005-2010, the reform is expected to be confirmed by the Israeli parliament, Knesset, by September 2005. The reform includes: Reduction of v.a.t rate, from 17% to 16.5%,starting 9/2005. Reduction of corporate income tax from 34% to 25% by 2009. Reduction of top marginal individual income tax rate,from current 49% to 44% by 2009. Increase of income tax rate on stock exchange gains,from current 15% to 20% in 2006. 100% accelerated depreciation for investment in fixed assets from 9/2005 to 9/2006. Exemption from capital gains for foreign investors,subject to certain conditions. Income Tax in Israel January 2005 From 1.1.2005 the new corporate income tax rate in Israel is 34% (previous rate-35%). -Tax on real income from sale of shares in foreign stock exchanges is 15%, same as for sales in Israel stock exchange. Israel Tax Pre-Ruling Procedures December 2004 Mr. Eitan Rob, director of Israel's Tax Authority declared the inclusion of pre-ruling decisions in Israel, starting 1.1.2005. The pre-ruling decisions should be given by Israel's Tax Authority within a time limit of 90-120 days. The decisions would be published in the Tax Authority web site without revealing details of the taxpayer. If agreed, the decision would oblige both sides, in case of disagreement, the taxpayer may apply to Israel's court. Israel Income Tax June 2004 The new corporate income tax rate for 2004 is 35% (previous rate-36%). The rates for the following years:        2005-34%        2006-32%        2007-30% V.A.T. in Israel March 2004 From 1.3.2004 the new v.a.t. rate is 17%. ( previous rate - 18% ). Israel Income Tax July 2002 A major tax reform is effective from 1.1.2003 Main changes: Change of the tax system relating to income abroad,personal basis,instead of territorial basis. New capital gain rate-25%(individuals and companies) Taxes on income from stock exchange gains:                   2003, turnover tax (0.5%-1%)                   1.1.2004 onwards-15% on real income. 10% tax on shekel deposits and debentures. 15% tax on income from rent&interest abroad. Israel V.A.T. June 2002 From 15.6.2002 onwards the new v.a.t. rate is 18%( previous rate - 17%).

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