Transcript Tax Issues When Making Aliyah
Tax Issues When Making Aliyah
Presented by Philip Stein CPA, (USA)
Myths & Facts
• Israeli taxes are outrageously high Myth • Israel will take all of your money • If you pay US tax; you don ’ t need to pay Israeli Income Tax Myth Myth • Israel has a backward tax system and they will never catch you Myth
A 10 year vacation from Israeli Tax
What does the exemption cover?
• 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 1 st 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?
• • Real Estate Tax Who pays?
Arnona
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 Ltd.
www.pstein.com
U.S. Phone: 866-995-1040 U.S. Fax: 866-611-8256