A new Jewish immigrant to Israel (or Oleh) is entitled to a reduction of almost 100% on your income tax for the first 18 months of your stay, followed by a significant reduction until 3.5 years after Aliyah (the Hebrew word for “the return to Israel”).
The tax system in Israel demands that Israelis pay tax on all sources of income, in Israel and abroad.
In 2008 Israel's corporate income tax rate is fixed at 27%, individual income tax rates are 10%-47% depending on your income.
There are reduced tax rates for passive income from abroad such as rents and interest.
Employees have their taxes deducted at the source by their employer, who then transfers the tax to the Income Tax Office on the 15th of the month for the preceding period. Employers who have a large number of employees report to the Tax Authorities once a month, while employers with a lesser number of employees submit their returns once every two months. As a self-employed worker you pay in advance to the Income Tax Office on the 15th of the month; the amount of tax payable is determined by the Tax Authorities according to your previous year’s income.
There is no local income tax in Israel and social security contributions (known in Israel as National Insurance) are included in direct taxation.
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