Tax Issues When Making Aliyah - Philip Stein _ Associates

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					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
                                            Myth
•   If you pay US tax; you don’t need to
    pay Israeli Income Tax                  Myth

•   Israel has a backward tax system
                                            Myth
    and they will never catch you
A 10 year vacation from Israeli Tax
      What does the exemption
•   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
• Farewell to state tax

• Farewell to higher taxes

• Welcome to a new beginning
     Example of Israeli Salaries

•   15,000 Shekel a Month   •   23%

•   20,000 Shekel a Month   •   29%

•   30,000 Shekel a Month   •   35%

•   35000 Shekel a Month    •   36.5%
              U.S. Taxpayer

•   Family of 5

•   Total Income 120k

•   Pays NY State Tax

•   Has 20k in itemized deductions
Effective Tax?

Hidden Taxes in the US

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.

 •   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
•   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?

•   Real Estate Tax
•   Who pays?
        Your House- rent or sell?

•   No gain + no rent = no tax
•   Gain + no rent = up to $500,000
•    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
             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
Philip Stein & Associates Ltd.

     U.S. Phone: 866-995-1040

      U.S. Fax: 866-611-8256

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