Recent Amendments to Israeli Tax Regulations and rates
"The law to change the tax burden, 2011" ("The Law"), was approved by the Knesset on December 2011. This Law comprises significant changes in the Income tax rates to be applied since 2012 onwards, compared to the situation today, as well as other related changes.
The main components of the Law are:
- Cancellation of the previously approved tax reductions designed to reduce marginal tax rates up to a maximum of 40% for individuals and up to 18% for companies in
2016. Following the amendment, tax rates will not be reduced.Increase in marginal tax rate on individual income rate, from 44% to 48%, since 2012 onwards.
- Increase in corporate tax rate, to 25% (instead of 23%), starting with 2012 onwards.
- Tax rates on income derived from personal investment gains are increased by 5%, effective from 01.01.2012 (the increase will be generally calculated linearly, with several exceptions, as explained below). Tax rate on personal income from interest, dividends, capital gains and land betterment will rise from 20% to 25%, while for a "substantial shareholder"; the tax rate will be increased from 25% to 30%. Tax rate on interest and capital gains from non linked deposits and debentures will remain at the actual rate of 15%.
- Exceptions to linearity taxation:
a. The new tax rate fully applies on dividends received since 1.1.2012 onwards, even if they are derived from previous years' profits.
b. The previous tax rate of 20% will apply on goodwill sold until 31/12/2011. Profit arising on goodwill sold after this date will be fully taxed at a rate of 25%.
c. Tax rate of 25% will be applied on whole real profit on securities sold since 2012 compared to 20% applied on securities sold till the end of 2011.
- Tax rate on sale of shares in a "Land holding company" was increased substantially - a "substantial shareholder" selling shares in a "Land holding company", will be
subject to tax rate of 30% (instead of the actual rate of 20%) on his real profit.
- Tax rates on Land Betterment or capital gains upon sale of assets acquired before 04.01.1961, are subject to reduced tax rates. These reduced tax rates will be raised gradually up to the level of current tax rates.
- Reduction of taxable Social Security ceiling - Since 2012, Social Security charge will apply up to a maximum monthly income of 41,000 NIS (compared to the existing ceiling of 73,000 NIS), approx.
For further information please contact:
Mr. Mario Guilman
HLB Gai, Goffer, Yahav, Guilman, Udem & Assoc
74 Menachem Begin St
Phone: +972 3 5622282
HLB Gai, Goffer, Yahav, Guilman, Udem & Assoc is an independent member of HLB International.
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