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27 March 2015

Are you required to file a 2014 tax return?

This post is a similar post from last year, with the required amendments etc. pertinent to the 2014 tax year. The current deadline for filing your 2014 tax return is 31st May 2015 (but this is likely to be extended by a month).

The Tax Law states that every Israeli resident is required to file a tax return every year, and doing so late results in hefty penalties (in excess of NIS 1,000 for each month between the official deadline and the actual filing).

That being said, a supplementary ruling to the law grants exemptions from filing if you (and your spouse - assume this the whole way through this post) meet certain criteria.

The exemptions are in place in order to relieve the burden on the already-overstrechted tax authorities having to process tax returns for people who won't have any supplementary tax to pay anyway.

There are though certain people whose circumstances dictate that they must file, regardless of their earnings. If you fall into at least one of the following categories, you must file a return:

(1) You are a controlling shareholder (10%+ ownership including holdings of close family) of a company or similar corporation. This applies to all Israeli corporations, and many overseas corporations.
(2) Earned income of husband and wife is assessed together, rather than seperate calculations. See here for more.
(3) You received severance pay that was spread over a number of years - one of those years being 2014 (known as פריסת פיצויים).

(4) You were required to file a tax return for 2013, but not for one of these reasons.
(5) You own shares in a non-publically traded non-Israeli corporation.
(6) The value of your overseas assets at any point in 2014 exceeded NIS 1,874,000. This requirement is not relevant for those who fall into the "10-year exemption" for new olim.

So, assuming you do not meet any of the criteria above, you are exempt from filing a 2014 tax return if your income in 2014 was exclusively from the following list. If you had income from any other source, you are required to file:

(1) Salary (including pension and פיצויים) - if the gross amounts received were less than NIS 660,000 (per spouse) and tax was deducted at source.
(2) Rental income (above the exemption limit), provided that (a) the total gross rents were less than NIS 337,000 and (b) the 10% tax was paid by 30th January 2015.
(3) Foreign interest, dividends, capital gains etc, provided that (a) the total gross income was less than NIS 337,000 and (b) the tax (the rates depend on the exact nature of the income) was paid using the "short form" at the post office or online by 30th April 2015.
(4) Foreign pension, provided that (a) the total gross income was less than NIS 337,000 and (b) no tax is due in Israel under the provisions of section 9c of the tax law (see here for more) - beyond the scope of this post - perhaps I'll address it some other time).
(5) Israeli-sourced interest and/or linkage income, provided that either (a) it is exempt from Israeli tax or (b) tax was deduced at source and the gross income was less than NIS 644,000.
(6) Capital gains made on the sale of publically listed shares provided that either (a) it is exempt from Israeli tax or (b) tax was deduced at source and the gross sales were less than NIS 1,874,000.
(7) Other types of income which are subject to tax and tax has been deducted at the maximum rate.
(8) Other income exempt from Israeli taxes.

(9) Your total taxable income from all sources was less than NIS 811,560.

If the total gross income of (7) and (8) combined is at least NIS 337,000, no exemption is granted.

Whilst this looks a little daunting, in many situations the requirement or exemption from filing is reasonably clear - but if in doubt, take professional advice.

18 March 2015

Working Grant 2014 מענק עבודה

This was previously known as Negative Income Tax - מס הכנסה שלילי.

A number of years ago, the government introduced a scheme designed to help workers earning very little. This grant, based on average monthly earnings in the previous tax year, was initially available only to those living in certain parts of the country.

Who is eligible?

You must meet the following criteria:
1. Be aged 55+ or aged between 23 and 54 and have at least one child.

2. You, together with your spouse, own no more than a 50% stake in any land or property (worldwide) that is not your residence.

3. Your average monthly earnings in 2014 (salary or freelancer, based on actual months worked) was between approx. NIS 2,070 and NIS 6,766.

It should be stressed that you are not eligible for months on which you received salary from a family member, or a company controlled by a family member.

Furthermore, maternity pay received from Bituach Leumi is treated as earnings for these purposes.

4. If you were required to file a tax return for 2014, you did so on time (including those who received extensions)

5. The claim must be made by 30th September 2015, so you need to move fast! That being said, the deadlines on the last few years were extended to December.

6. Any employer filed their employer-summary form on time (form 126). If they did not, you will be asked to provide the authorities with form 106 in order for them to fully process your claim.

How much is the grant?

The grant, per month of eligibility, is based on your average monthly earnings and can reach as high as NIS 720. The full table is as follows:

Monthly grant (NIS)
Average monthly income (NIS)
- woman (1 or 2 children)
- single father responsible for 1 or 2 children
- married father (1 or 2 children)
- aged 55+ without children
- woman (3+ children)
- single father responsible for 3+ children
- married father (3+ children)
The amounts here are based on the 1st June 2014 figures, and will be amended with inflation on 1st June 2015.

In certain circumstances, the amount due to you will be reduced. This is the case if you are in receipt of one (or more) of the following:

1. Pension income, excluding disability or survivor pensions.
2. Bituach Leumi grant for work or other accident.

Similarly, your spouse's income could reduce your grant.

A simulator (Hebrew only) has been provided by the tax authorities here. It's worth having a look at if you think your claim is borderline.

How to make the claim

The claim is made at a post office branch (and only there), and must be made in person. Be careful though: not all post offices are officially branches - check the postal service website before setting off.

You need to take with you your ID card (Teudat Zehut) and a cheque (of formal notification of account details from the bank).

The clerk will hand you a form on which you state:
  • Number of employers in 2014 for both you and your spouse.
  • Whether you we're self employed in 2014
  • Postal address
  • Bank details
You will get to keep a portion of the form, which will have details regarding how to monitor your claim. You can monitor your claim online here (Hebrew only).

How you get paid

If you are an employee, you will receive your grant in two, three or four equal payments directly into your bank account, depending on whether you get the form in by the end of March 2015, June 2015 or later.

If you are self-employed (with employment income below NIS 2,070 per month), the grant is offset against your 2014 tax liability. If you have excess grant, it will be offset against the next three year's tax liabilities (i.e. 2015, 2016 & 2017). If, after that, there is still some grant left over, 75% of the remainder will be paid directly into your bank account on 15th July 2019.