Isral Tax Hot Tips
Tax Refund from Losses in the Israeli Stock Exchange
May 2009Background:
The Israeli tax laws enable to offset losses in the Israeli stock exchange against certain capital gains.Thus 2008 losses can be setoff against:
2008 gains from sale of shares traded in the Israeli stock exchange.
2008 gains from sale of shares in foreign stock exhanges.
Any other 2008 capital gain, including sale of non-traded shares and real estate.
2008 income from dividends and interest on bonds.
Any 2008 loss, not setoff against the above mentioned sources of income, can be carried forward to 2009 and setoff against 2009 gains from sale of shares or realestate.
Many taxpayers lose a lot of overpaid tax due to the fact that many Israeli banks/stockbrokers do not send automatically an annual report including stock exchange gains/losses data.
Example 1
| Income (Loss)(IS) | Tax Withheld(IS) | |
|---|---|---|
| In 3/2008 you sold shares in Israel | 300,000 | 60,000 (20%) |
| In 5/2008 you sold shares in Israel | (300,000) | 0 |
| Net 2008 results | 0 | 60,000 |
In this case you are entitled to I.S. 60,000 refund, you will not get it unless you take a positive action as will be described later .
Example 2
| Income (Loss)(IS) | Tax Withheld(IS) | |
|---|---|---|
| 3/2008 you sold shares in Israel | 300,000 | 60,000 |
| 12/2008 you sold share in the NYSE | (200,000) | 0 |
| net 2008 results | 100,000 | 60,000 |
The tax refund is I.S. 40,000 (60,000 less tax of 20%*100,000 )
Example 3
| Income (Loss) (IS) | Tax Withheld(IS) | |
|---|---|---|
| 3/2008 you received interest income on bonds | 300,000 | 60,000 |
| 11/2008 you sold shares in Israel | (300,000) | 0 |
| net 2008 results | 0 | 60,000 |
| tax refund due | 60,000 |
Tax tips:
1. Many Israeli banks/stockbrokers do not send automatic annual reports to their customers. The tax authority will not send you a refund, unless you file an annual report.2. The relevant annual reports are:
- Form 867a - For sale of shares.
- Form 867b - For dividend and interest from shares/bonds.
Generally you will get it within 24 hours.
4. Get annual reports about gains/losses in foreign stock exchanges too.
5. Present the reports to an Israeli tax expert, within a few minitues he will tell you the estimated tax refund due.
6. Even if you do not have a tax file in Israel, you can file a report voluntarily asking for the refund.
7. Such reports can be filed backwards for the years 2003 0nwards (within seven years).
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