preface

BDO Israel
DOING BUSINESS IN ISRAEL
8.2.3.2.1. The tax brackets are adjusted in accordance with changes in
the CPI.
Income from dividends, interest, rental of residential dwellings,
etc. (passive sources), is taxed differently. Allowances or credits
are granted for savings in pension funds, life insurance, etc.
The lowest tax rate applies to earnings from personal effort.
Income from passive sources is taxed at a rate of 30% or more.
Senior citizens’ income, even if not derived from personal effort,
is taxed at a rate of 10% or more.
8.2.3.3. Rental Income
An individual for whom revenue was generated from rental
income on a residential apartment, may during the 2009 tax
year, opt to become liable to tax in respect of rental income not
exceeding revenue from a business, in one of the following
alternatives:
A. Income tax charged in accordance with the provisions of the
Income Tax Law (Tax Exemption from Renting a Residential
Apartment) 5730-1990; tax exemption up to NIS 4,790 per
month (for the year 2011), or if the apartment and rent
exceed NIS 4,790, tax-exempt income up to the current
annual ceiling allowed, less the difference between actual
rental income and the ceiling.
B. Income tax charged at the rate of 10%, without a tax ceiling
or exemption. An individual opting for this alternative may
neither deduct depreciation nor amortizations, nor be eligible
for credit, deductions or exemptions, provided an advance
was paid within 30 days from the end of the tax year in
which rental income was generated for the individual.
C. Taxation under the “regular” tax bracket: on rental income
under this alternative, the assessee’s marginal tax rate
applies. Here, the individual may deduct depreciation,
amortizations, and also be eligible for credit, deductions or
exemptions to which he is entitled.
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