tax issues when making aliya
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Tax Issues When Making Aliya, presented in 2010 by Philip Stein; potentioal OlimTRANSCRIPT
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5 most important Q you need to know
• Is that Bruto or Netto?
• ?זה כולל מע"מ
• ?יש הנחה
• ?אפשר תשלומים
• ?זה צמוד למדד
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Myths & Facts
• Israeli taxes are outrageously high
• Israel will take all of your money
• If you pay US tax; you don’t need to
pay Israeli Income Tax
• Israel has a backward tax system
and they will never catch you
Myth
Myth
Myth
Myth
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Vacation from Israeli Tax
A 10 Year
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What does the exemption cover?
• All passive income from outside of Israel
• All active income from outside of Israel
• No reporting requirements
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10 Year Passive Income Exemption
• Interest
• Dividends
• Rentals
• Pensions
• Royalties
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10 Year Exemption
• Applies to capital gains
• Applies to earned income in the U.S.
• Non real estate generally exempt from
state income tax
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10 year exemption
• Effective as of Oct. 2010• Form 2402B• Deposits must fulfill:- Invested for more than 3 months- Owned outside of Israel prior to being an
Israeli resident- Deposit within 90 days from arrival
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• No tax on social security payments
• No tax for 10 years on pensions
• No more state tax on retirement income
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• Farewell to state tax• Farewell to higher taxes• Welcome to a new beginning
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Example of Israeli Salaries
• 15,000 Shekel a Month
• 20,000 Shekel a Month
• 30,000 Shekel a Month
• 35,000 Shekel a Month 24.8% 33%
2010 Average income tax
2010 marginal income tax
14.6% 30%
18.7% 33%
23.4% 33%
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U.S. Taxpayer• Family of 5
• Total Income 120k
• Pays NY State Tax
• Has 20k in itemized deductions
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Effective Tax?
26.1%
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Hidden Taxes in the US
Tuition
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• Where do I work? • Where do I earn my income?
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Where Do I Pay?
• Treaty since 1995
• Prevents Double Taxation
• Always pay the higher amount
• Framework that both countries respect
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“But I don’t work for an Israeli company ”
• Self employed in Israel for a U.S. company
• Working in Israel for a U.S. company
• Where do you pay tax?
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Do I have to open a ‘tik?’
• ‘Atzmai’• Incorporate• Outsource
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What taxes do I pay in Israel?
• Income Tax- ‘Mas Hachnasa’
• ‘Bituach Leumi’- 9%
• ‘Mas Briut’- 5%
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The Problem with Self-Employment Tax
• No treaty to prevent double taxation- Social
Security and ‘Bituach Leumi’
• Self-Employment Tax 15.3% on approximate
1st 106k
• Medicare 2.9% on income above 106k
• Consider incorporating in Israel
• Accounting fees are deductible
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What about VAT?
• Rate 15.5%• Different than sales tax?
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Arnona
• Real Estate Tax• Who pays?
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Your House- rent or sell?
• No gain + no rent = no tax• Gain + no rent = up to $500,000 exclusion• Gain + Rent = new rules
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New Rules for sale of house
• Part of gain can’t be excluded• The longer the rental period, the smaller
the exclusion• Allowable depreciation for the rental
period is taxable income • Leaving the house empty, preserves the
tax exemption• Must sell no more than 3 years after
leaving
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Trust Exemption
• Established and funded by long term non-
Israeli resident
• Israeli beneficiary is not trustee
• Israeli beneficiary has no control
• Israeli beneficiary cannot contribute to the
trust
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Philip Stein & Associates Ltd.
[email protected]@pstein.comwww.pstein.com
U.S. Phone: 866-995-1040
U.S. Fax: 866-611-8256