The Legal Requirement of Paying Taxes
First, you should determine whether you're legally required to pay taxes. Working in another country doesn't automatically mean you're a taxpayer there. Here in Israel, you're gonna need more than just our Israeli visa to be able to contribute your fair share of taxes. Only citizens and residents are obliged to pay them here. And you'll only be considered a tax resident if you've spent no less than 183 days (approximately six months) in the tax calendar year here in Israel. Or a total of 425 days within two years. And you'll only be taxed on Israeli-sourced income, unless your'e a citizen, then you'll be taxed on all your income.
Personal Income Tax Rates
Once you find a job in Israel, expect that you'll automatically be taxed on your personal income. And just like in other countries, the rate you'll have to pay depends on how much you earn in a year. For instance, if you earn around less than or equal to 75,720₪ a year your tax rate is only at 10%. It's 14% for an annual salary of 75,721.00₪ to 108,600₪.00, 20% if you earn around 108,601.00₪ to 174,360.00₪ a year, and 31% if you earn 174,361.00₪ to 242,400.00₪. It goes further to 35% for annual salaries ranging from 242,401.00₪ to 504,360.00₪, 45% for 504,361.00₪ to 649,560.00₪, and finally, 50% if earn over 649,560.00 a year
When to File Taxes
As with other countries, Israel's tax year follows the calendar year. This means, when you file your taxes for the previous year, its scope covers January 1 to December 31 of that year. Taxes are due on April 30 every year and you have to file and submit everything by May 31. Failure to do so can lead to high penalties and possibly even some jail time. If you're owed a tax refund, make sure your local bank in Israel knows about it. It's they who will handle this transaction. And you only have to wait for a maximum of three months to get it.
Israel's Corporate Tax Rate
As Israel's economy improves and the job market strengthens, it's not surprising that it's seeing a lot of companies popping up left and right. From tech startups to international enterprises, it's no wonder that cities like Tel Aviv and Jerusalem are becoming major business hubs, not just in Israel, but in the entire Middle East as well. And because of this, the country's corporate taxes are more important than ever. All corporate taxes in the country are at a fixed rate of 23%, and if you plan to open your own business here, know that this is yet another tax you'll have to pay for.
Social Security Payments in Israel
Another important type of tax you have to look forward to is your social security contribution. This is the tax that helps keep Israel's healthcare system intact and earns you money for your pension when you retire. Uniquely, the rate you have to pay depends on your role in the workforce but how much you earn still comes to play just a bit. If you're an ordinary employee, your rate ranges from 3.45%-7.5%. An employer's rate is from 3.5% to 12%. And for the self-employed, your rate is from 5.97%-17.83%. More often than not, your employer would already deduct this tax from your salary before they pay it to you at the end of the month.
Finally, the one type of tax that everyone, including non-residents, pays in Israel is its Value-Added Tax. No matter your legal status in the country, how much you earn, and more, you still contribute to this tax. It's imposed on practically all goods and services, from the candy you bought in a convenience store to the massage you just enjoyed in a luxury spa. And with a fixed rate of 16%, you often barely even know that you just paid for it. Just know that the products you just bought cost a little more than their retail prices because of this tax.
Moving to Israel is a lot easier if you already understood how they impose and pay taxes here even before you land in the country. Because the less you know about its tax system, the more it will stress you here!
Handling your taxes better might help you save more money to get a luxurious Israeli apartment as your new home here!