What are the latest tax rates applicable in Israel?

Question:
I heard that there have recently been new tax changes made in Israel. Can you advise me what these are? Anxious taxpayer
Sent (September 1, 2007)

Answer:
By: ACL

Dear Anxious taxpayer,
One of the last achievements that Bibi Netanyahu accomplished before resigning as Finance Minister, was to pass a set of new tax laws, which I will summarize briefly below, as they apply to individuals. Should you feel that any of these impact you, please follow this up with your financial and tax advisors.

• Reduction of maximum personal tax rates on work income as follows
  • 2006 – 49%
  • 2007 – 48%
  • 2008 – 47%
  • 2009 – 46%
  • 2010 – 45%
• Reduction of tax on companies
  • 2006 – 31%
  • 2007 – 29%
  • 2008 – 27%
  • 2009 – 25%
  • 2010 – 25%
• Exemption on purchase tax for residential dwellings up to the value of NIS 550,000. This equates to a saving of NIS 6,000.
• Unification of taxes on passive investment / unearned income. The capital gains tax rates and tax rates on dividends and interest earned are now 20%. This applies to investments held in Israel or abroad.
• Tax on interest earned on shekel deposits held in Israeli banks is now a rate of 15%.
• Implementation of taxation of offshore trusts that were previously outside of the tax net.

In summary, the net effect of these changes was to spread the tax net wider, and thus reduce the  tax burden on the individual taxpayer. It also neutralized the disincentive for Israeli residents to invest offshore, since whatever investment strategy is now adopted by an Israeli resident, the resulting tax consequences will be similar.

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