Tax exemption for the disabled in Israel (PMR)

Impots Handicap Israel Cabinet Expert Comptable Dray & Dray

Did you know?

The Israeli government decides to help people with disabilities in their economic development.

Thus, a person with reduced mobility (PMR) has a tax exemption of up to 608,400 shekels per year (current rate for 2016).

In other words, a person with a disability in Israel will pay no tax if his or her annual income does not exceed 608,400 shekels per year.

The difference between "active income" and "passive income

The Israeli tax authorities grant different exemptions depending on the type of income received:

  • Is the income of a person with reduced mobility "passive income"?
  • Or is it "active income"?

This type of income categorization is essential!

The amount of the exemption varies according to the category of income received.

What qualifies as "active income"?

An "active income", for example, would be :

  • A monthly salary.
  • Pre-tax profit from business activities (Ossek Patour or Ossek Mourché).

What qualifies as "passive income"?

For example, a "passive income" would be :

  • Dividends received from a company in which you are a shareholder.
  • Financial interest from bank investments or stock portfolios.

Israel encourages employment and work

To encourage the disabled in Israel to enter the world of work, the government has decided that the exemption for "active income" will be set at 608,400 shekels per year.

On the other hand, for "passive income", the exemption will be set at 72,960 shekels per year.

It is important to note that these exemptions are not cumulative.

In other words, a person with reduced mobility can benefit from the exemption on passive income only if his or her active income does not exceed 72,960 shekels per year.

Here are a few examples to help you understand how to benefit from this exemption.

Example 1 Mr Cohen suffers from a 100% disability. He is a computer developer and earns a monthly salary of 35,000 shekels. In this case, Mr. Cohen will pay no tax, as his annual income (35,000 * 12 = 420,000 shekels) is less than the exemption amount.

Example 2 Mr. Cohen also receives dividends from an Israeli company, to the tune of 190,000 shekels a year. He owns 40% shares in this company. In this case, Mr. Cohen will not pay tax on his income as an employee. However, he will be taxed 30% on the amount of his annual dividends. See also: How does taxation work for an Israeli company?

Example 3 Our dear Mr Cohen has taken a sabbatical. As a result, he now only receives dividends amounting to 190,000 shekels a year. As a result, Mr. Cohen now only receives what is known as "passive income". In this case, he will be exempt on 76,000 shekels, and will be taxed on the difference (190,000 - 76,000 = 114,000) at 30%.

Your questions - Our advice :

  • If we haven't used up all the exemption this year, can we carry over this "remaining amount" to the following year?
  • What happens with rental income from real estate in our possession?
  • Can I benefit from the exemption if my degree of disability is less than 100%?
  • I don't pay taxes, but how much Bitouah Léoumi will I pay?

As the tax savings that can be achieved through this exemption are substantial, it is advisable to seek the advice of Israeli tax specialists.[/vc_column_text][/vc_column][/vc_row]



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