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Tax Issues When Making Aliyah

Tax Issues When Making Aliyah. Presented by Philip Stein CPA, (USA). Israeli taxes are outrageously high Israel will take all of your money If you pay US tax; you don ’ t need to pay Israeli Income Tax Israel has a backward tax system and they will never catch you. Myth Myth Myth Myth.

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Tax Issues When Making Aliyah

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  1. Tax Issues When Making Aliyah Presented by Philip Stein CPA, (USA)

  2. Israeli taxes are outrageously high Israel will take all of your money If you pay US tax; you don’t need to pay Israeli Income Tax Israel has a backward tax system and they will never catch you Myth Myth Myth Myth Myths & Facts

  3. A 10 year vacation from Israeli Tax

  4. What does the exemption cover? • All passive income from outside of Israel • All active income from outside of Israel • No reporting requirements

  5. 10 Year Passive Income Exemption • Interest • Dividends • Rentals • Pensions • Royalties

  6. 10 Year Exemption • Applies to capital gains • Applies to earned income in the U.S. • Non real estate generally exempt from state income tax

  7. No tax on social security payments • No tax for 10 years on pensions • No more state tax on retirement income

  8. Farewell to state tax • Farewell to higher taxes • Welcome to a new beginning

  9. 15,000 Shekel a Month 20,000 Shekel a Month 30,000 Shekel a Month 35000 Shekel a Month 23% 29% 35% 36.5% Example of Israeli Salaries

  10. U.S. Taxpayer • Family of 5 • Total Income 120k • Pays NY State Tax • Has 20k in itemized deductions

  11. Effective Tax? 26.1%

  12. Hidden Taxes in the US Tuition

  13. Where do I work Where do I earn my income

  14. Where Do I Pay? • Treaty since 1995 • Prevents Double Taxation • Always pay the higher amount • Framework that both countries respect

  15. “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?

  16. Do I have to open a ‘tik’? • ‘Atzmai’ • Incorporate • Outsource

  17. What taxes do I pay in Israel? • Income Tax- ‘Mas Hachnasa’ • ‘Bituach Leumi’- 9% • ‘Mas Briut’- 5%

  18. The Problem with Self-Employment Tax • 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

  19. What about VAT? • Rate 16% • Different than sales tax?

  20. Arnona • Real Estate Tax • Who pays?

  21. Your House- rent or sell? • No gain + no rent = no tax • Gain + no rent = up to $500,000 exclusion • Gain + Rent = new rules

  22. 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

  23. 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

  24. Philip Stein & Associates Ltd. pstein@pstein.com admin@pstein.com www.pstein.com U.S. Phone: 866-995-1040 U.S. Fax: 866-611-8256

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