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Tax Issues When Making Aliyah. Presented by Philip Stein CPA, (USA). 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. - PowerPoint PPT Presentation
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Tax Issues When Making AliyahPresented by Philip Stein CPA, (USA)
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
A 10 year vacation from Israeli Tax
What does the exemption What does the exemption covercover??
• All passive income from outside of Israel
• All active income from outside of Israel
• No reporting requirements
10 Year Passive Income Exemption
• Interest
• Dividends
• Rentals
• Pensions
• Royalties
10 Year Exemption
• Applies to capital gains
• Applies to earned income in the U.S.
• Non real estate generally exempt from
state income tax
• No tax on social security payments
• No tax for 10 years on pensions
• No more state tax on retirement
income
• Farewell to state tax
• Farewell to higher taxes • Welcome to a new beginning
Example of Israeli Salaries
• 15,000 Shekel a Month
• 20,000 Shekel a Month
• 30,000 Shekel a Month
• 35000 Shekel a Month
• 23%
• 29%
• 35%
• 36.5%
U.S. Taxpayer
• Family of 5
• Total Income 120k
• Pays NY State Tax
• Has 20k in itemized deductions
Effective Tax?
26.1%
Hidden Taxes in the US
Tuition
Where do I work
Where do I earn my income
Where Do I Pay?
• Treaty since 1995
• Prevents Double Taxation
• Always pay the higher amount
• Framework that both countries respect
“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?
Do I have to open a ‘tik?’
• ‘Atzmai’• Incorporate• Outsource
What taxes do I pay in Israel?
• Income Tax- ‘Mas Hachnasa’
• ‘Bituach Leumi’- 9%
• ‘Mas Briut’- 5%
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 100k
• Medicare 2.9% on income above 100k
• Consider incorporating in Israel
• Accounting fees are deductible
What about VAT?
• Rate 16%• Different than sales tax?
Arnona
• Real Estate Tax• Who pays?
Your House- rent or sell?
• No gain + no rent = no tax• Gain + no rent = up to $500,000 exclusion• Gain + Rent = new rules
New Rules for sale of house
• Part of gain can’t be excluded• The longer the rental period, the smaller
the exclusion• Leaving the house empty, preserves the
tax exemption• Must sell no more than 3 years after
leaving
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
Philip Stein & Associates [email protected]@pstein.com
www.pstein.com
U.S. Phone: 866-995-1040
U.S. Fax: 866-611-8256