preface

BDO Israel
DOING BUSINESS IN ISRAEL
8.2.3.6. Taxation of Interest Income from the Capital Market
Most of the interest income from bank deposits and savings
plans will be subject to tax at rates varying between 20% (15%
with respect to deposits not linked to the Index or foreign
currency) or marginal tax rate for individuals, if certain
conditions are met. Concurrently with the tax liability,
exemptions were determined for low income earners and retired
persons.
It should be pointed out that if a taxpayer’s interest income and
additional passive income exceed his business income, such
income may be subject to national insurance.
8.2.3.7. Benefits to New Immigrants and Returning Residents
A “new immigrant” is classified as an individual who has, for
the first time, acquired the status of Israeli resident.
A “returning resident” is classified as an individual who has
ceased to be an Israeli resident and has been a permanent
resident abroad during at least six consecutive years after
ceasing to be an Israeli resident, subsequent to which he returned
to Israel. However, a transitional order has been adopted
whereby the provisions of the Law, prior to being amended, will
continue to apply to individuals who ceased to be Israeli
residents before January 2009. In other words, an individual who
ceased to be an Israeli resident before January 2009 will be
deemed to be a returning resident even if has resided
permanently outside Israel for three consecutive years after
ceasing to be an Israeli resident.
A “veteran returning resident” is classified as an individual who
has returned to Israel and become an Israeli resident after ten
years at least of consecutive residence abroad. However,
transitional orders have been adopted stipulating that, with
respect to years 2007-2009, a returning resident who has become
an Israeli resident for tax purposes, will be considered a “veteran
returning resident” if he resided outside Israel for only five
consecutive years prior to his return (instead of ten years).
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