The mandatory pension rates have been updated from Jan 2013 onwards as follows:
Employee – 5%
Employer – 5% + additional 5% towards severance pay.
total 15%
This is the 6th update out of 7. The law which began in Jan 2008 to ensure a pension to all salaried employees in Israel.
In 2014, the last update will come into effect.
New e-book released this week on Amazon for Kindle
Tax Benefits for Salaried Employees in Israel
by Moshe Egel-Tal
A guide for the perplexed Israeli salaried employee regarding tax benefits via the payslip and/or when filing a tax rebate.
2013 Tax Brackets
The value of each tax credit point has been updated to 218 sh.
These changes are effective from Jan 1, 2013 (January 2013 salary).
|
Tax Bracket |
Gross pay |
Tax |
|
10% |
5,280 |
528 |
|
14% |
9,010 |
1,050 |
|
21% |
14,000 |
2,098 |
|
31% |
20,000 |
3,958 |
|
34% |
41,830 |
11,380 |
|
48% |
Each additional sh |
As of Jan 1st, 2013 the amounts exempt from garnished wages have been updated as follows:
single – 2,122 sh
widower/divorced/single parent + 1 child – 3,432 sh
widower/divorced/single parent + 2 or more children – 4,281 sh
couple – 3,183 sh
couple + 1 child – 3,692 sh
couple + 2 or more children – 4,201 sh
Notes:
1) The above amounts do not apply to garnished wages for alimony.
2) Should the above amounts be more than 80% of the monthly salary (after deductions for income tax and social security and health tax) the amount exempt shall be reduced to 80% of the actual monthly salary.
source: protection of salary law, 1958 update 2013
All employers know that their monthly payments and reporting to V.A.T., the Tax Authority & the National Insurance Institute (Social Security) (including payments deducted from payroll) need to be filed and paid by the 15th of each calendar month for the previous month.
But is this necessarily true ?
A recent notification to employers, by the Israel Tax Authority, dated December 10, 2012 states the following:
1. According to the wording of the V.A.T. law and the directives of the Income tax directives, periodic reports and payments must be filed by the 15th of each month, each report and payment according to the applicable laws regarding them.
2. As per the above laws it has not been determined that if the 15th of the month falls out on the weekly rest day of the person/entity who is required to file and pay, the date of payment is deferred to the next business day.
3. However, in order to facilitate the members of all religions in Israel, the management of the Israel Tax Authority has decided that if the 15th of the month falls out on the weekly rest day of the person/entity who is required to file and pay, according to his/her religion, reporting and payment will be delayed until the next business day after the aforementioned weekly rest day.
What does this mean ?
Usually, when the 15th of the month fell out on Shabbat or Holiday, people would pay the day before, so as to avoid possible interest charges on tardy reporting and payments. the above referendum makes it clear that the Tax Authority is aware and sensitive to the people and will allow reporting and payment after the 15th when the weekly rest day or a holiday falls out on the 15th of the month, without chancing extra charges for late filing/payment, thus easing pressure to finish up prior to the 15th.
The above referendum can be found on the Tax Authority’s website:
http://taxes.gov.il/IncomeTax/Pages/IncoeTaxMeidaMaasikim.aspx
(they recommend best results using internet explorer browser)
We are pleased to announce that we are currently upgrading our site with new features, including:
And more………………………..
Stay tuned for updates !
The Ministry of Industry, Trade and Labor has launched an application that can be downloaded for free to an Iphone and will soon be available for smartphones too. If you are between the ages of 14-18 and employed or if you have children or grandchildren who are, this is for them !
What will this enable users to do ?
1. Know your rights and the employer’s lawful responsibilities towards youth
they employ.
2. Enable youth to keep track of their hours in an organized manner.
3. Salary calculator to figure out what you are owed.
4. Contact details for complaints to the Ministry’s labor law enforcement dept.
if they feel their employer is not obeying the laws.
5. Enable users to define a goal to save for, and enable them to track how many
more hours of work they need to reach their goal.
For now this application is available only in Hebrew.
It is downloadable from the Ministry’s website, here:
http://www.moital.gov.il/NR/exeres/46273C9D-B2FF-4DB3-A4ED-8D80E5BAC62F,frameless.htm
The municipality of Petah Tikva started a project for police patrol service via a security company. The service was to operate 24/7 via foot-patrol and motorized patrol.
Noa was invited to an interview and accepted to this position along with 16 others. She was the only female in the group. Noa was slotted in to do only the foot patrol on all her watches. She asked the person in charge of scheduling the shifts to put her on some motor-patrols as well, but was turned down, according to Noa “because people don’t want to see a woman driving a jeep…”
She was requested to pass an internal driving test to show she is capable of “navigating in the area” before she would even be considered for a motorized patrol, even though none of the other employees were required to do so.
Noa submitted a formal complaint to the labor court against her employer demanding 100,000 sh in damages pertaining to non-compliance with the equal opportunity in employment law, loss of income and tarnishing her good name and aggravation.
The labor court issued the following verdict:
The equal opportunity in employment law clearly states in section 2a that it is forbidden to discriminate due to sex, among other things, in accepting a candidate for employment, in training a candidate, in firing an employee, etc.
The law passes over the responsibility to the employer to prove their was no foul play and discrimination in his decision.
The court found that Noa wasn’t scheduled for motorized patrols simply because she is a woman. Also the fact that she was required to take extra tests as opposed to the men. Noa also submitted taped conversations between herself and her employer to back her claims. The court ruled that this is indeed invalid discrimination and although no monetary damage was proved, the court still believed that this type of behavior needs to be curbed harshly and therefore fined the employer 55,000 shekels.
Many Olim do not understand why they need to pay Bituach Leumi and Health Tax from their salary. “I pay my health tax to Kupat Cholim, so this is a double tax” or “I have health insurance from abroad – I don’t need it, so can’t I just tell my employer to cancel it and not deduct it from my pay ?” are just a few of the questions I am asked frequently.
Well, no, you cannot just cancel it. Let’s start at the beginning: Before this started ( the mandatory health tax) in Jan 1995, people could choose not to be a member of a health fund (kupat cholim) and they weren’t insured. Each fund had it’s own criteria and could accept members, or not, according to their own criteria. These included past medical history, so for example, someone who had diabetes would not be able to choose which fund they wanted but were only accepted to Klalit.
The other thing was that each fund had different rates that were based on the member’s gross income. There were problems with this system too. If both husband and wife worked they paid more than if only one of them worked.
Let’s say that someone was wealthy, but was doing internship as a lawyer and thus making minimum wage, they would pay the minimum where someone else who made a bit more than that and maybe wasn’t as wealthy might pay double what the wealthy intern was paying.
Many people would forge payslips in order to get reduced rates.
The Health Ministry by introducing the mandatory health law put all of this in the past. Everyone who has Israeli citizenship must have a health fund. You can choose any fund and they must accept you. Today this is done simply by filling out a form at your local post office with your teudat zehut.
The basic coverage is deducted from the salary and transferred by the employer to Bituach Leumi each month. Each fund has additional coverage packages that are optional and one needs to sign up via the fund directly. payment is between you and the fund and there is no connection to your employer or your payslip.
The problem is that these additions are not cheap, but without them you will not get very much insurance at all. The basic insurance covers only what is specified by the law. (the coverage is updated from time to time – usually when the state budget is passed in the knesset)
So, in a way- Yes it is a double tax. If you work you pay, if not, not. However it is mandatory and not optional. If both Husband and wife are working you’re both paying, if only one works, the other is exempt from payment, either way you get the same coverage.
Employees that are Foreign workers or receiving an old-age stipend from Bituach Leumi are exempt from paying the health tax via payroll. (As opposed to Kupat Cholim payments which are a type of Insurance and non-payroll related. – contact your local Kupat Cholim for rates, etc)
Bituach Leumi is Social Security. The months that you work ensure that you procure credit for them via the deductions from your salary.
You are buying coverage for the following:
| Age | Social Security | Health tax | Who pays |
| 18 – retirement age | 0.4 % / 7 % | 3.1 % / 5 % | employee |
| 18 – retirement age | 3.45 % | 5.9 % | employer |
| up to age 18 or above retirement age and receiving old age stipend | 0.38 % / 0.93 % | exempt | employer only |
| From retirement age – (but not receiving old age stipend) | 0.27 % / 4.86 % | 3.1 % / 5 % | employee |
| From retirement age – (but not receiving old age stipend) | 3.15% | 5.38% | employer |
| Above old age stipend age (but not receiving old age stipend) | exempt | 3.1 % / 5 % | employee |
| Above old age stipend age (but not receiving old age stipend) | 0.38 % / 0.93 % | exempt | employer |
| Foreign employee | 0.04 % / 0.87 % | exempt | employee |
| Foreign employee | 0.49 % / 1.17 % | exempt | employer |
| Employee on non-paid vacation | 6.57 % from min wage | exempt | employee |
The severance pay law (1963) is the law that defines the employee’s right to severance pay at the end of employment.
On a side note, there are criteria specifically defined in the law that determine under which circumstances an employee is entitled to severance pay. But, that is not what this blog post is about. However, there are 2 basic criteria that determine eligibility for severance pay in regular cases: An employee worked for at least one year and he was fired. If the employee resigns he forfeits the right to severance pay. (There are exceptions, but we won’t get into that right now).
Section 14 of the severance pay law is titled “severance and benefits” and it deals with cases in which both the employer and employee made contributions (via the payslip) towards pension or savings plans. According to section 14, the monies accumulated in the “severance pay” portion can be substituted for severance pay. Or in other words, by releasing the severance pay portion to the employee, the employer would then be exempt from paying any severance pay !
In 1998, the Minister of Labor signed an order enabling employers together with their employees to agree on enforcing section 14 at the place of employment. In this case, they do not need the Minister’s signature to enforce it. However, there are certain criteria that must be met in order to enforce section 14:
All of the above conditions need to be met in order for this to be legal.
The above is a risk for both sides: for the employee, forfeits his right to full severance pay, even when fired. On the other hand, the employer forfeits his right to reclaim severance pay from the fund in case of resignation.
The aforementioned permit from 1998 allows for retroactive enforcement provided it be in writing and within 3 months of starting the pension plan for the employee, no later.
So if your employer wakes up one day and decides that section 14 should apply to all employees – not so fast !
Employers who give Mandatory pension plan only – the law which came into effect starting Jan 2008 at lower rates than full pension plans are not eligible foe section 14 of the severance pay law.
On Aug 13, 2012 The “law for reducing the national deficit and change of the burden of tax 2012” was made public.
This law goes into affect on Jan 1, 2013 and includes 2 items regarding employees:
1) A change in the tax brackets for salaried employees as follows (amounts are from total gross pay):
up to 62,400 sh annually – 10%
from 62,401 sh – 106,560 sh annually – 14%
from 106,561 sh – 168,000 sh annually – 21%
from 168,001 sh – 240,000 sh annually – 31%
from 240,001 sh – 501,960 sh annually – 34%
from every additional sh – 48%
2) Anyone making annual income which exceeds 800,000 sh will incur an additional 2% tax on the amount over 800,000 sh
Great news for all salaried employees who earn minimum wages. After the govt. raised the v.a.t. and the latest price hikes in almost everything we buy, The minister of Industry, Trade and Labor, Shalom Simchon announced today that the minimum wages will be raised from October 1st, 2012. This is the last update according to the last labor agreement signed two years ago between the Histadrut Haklalit and the Israeli Government and the Industry Union. The last update of the minimum wage was in July 2008.
The new hourly rate will be 23.10 sh (prev. 22.04)
The new monthly rate will be 4,300 sh (prev. 4,100) – a 4.9% increase.
This also effects the hourly rate for youth, as follows:
up to age 16 – 3,010 sh
up to age 17 – 3,225 sh
up to age 18 – 3,569 sh
This notification was issued early, prior to the Jewish new year (Rosh Hashana) and according to the Central Bureau of Statistics will effect about 600,000 employees in Israel.
