Withdrawing money from Keren Ichtalmout

Want to withdraw the money you've contributed to your Keren Ichtalmout? Here's a summary of the tips you need to know before withdrawing your contributions.

These benefits apply whether you are self-employed (Ossek Mourche or Ossek Patour), a company director or an employee in Israel.

What is Keren Ichtalmout?

• Keren Ichtalmout is a savings fund in Israel.
• Funds in a keren Ichtalmout can be withdrawn after 6 years' service (employees and self-employed).
• Interest earned during the Keren Ichtalmout ownership period is tax-exempt (under certain conditions).

Tips on Keren Ichtalmout

1. Funds in a keren Ichtalmout can be withdrawn after 6 years' service (employees and self-employed).
2. Stopping contributions during the 6-year period causes no damage. The accumulated funds continue to accumulate seniority and interest.
3. After 6 years, the money deposited in the fund is available for withdrawal at a later date. You are not obliged to withdraw it once the 6 years have elapsed.
4. Once the first partial withdrawal has been made, the fund is blocked and new deposits begin a new 6-year cycle.

(Basically, this represents a new fund with a new seniority).

TipOpen several funds in parallel to optimize the withdrawal of funds according to your needs.

Can we withdraw the amounts contributed before the end of the 6 years?

1. For studies in Israel or abroad, the accumulated amount can be withdrawn if 3 years have passed.
2. Anyone who reaches retirement age, the accumulated amount can be withdrawn if the fund has been in existence for 3 years.
3. On the death of the owner of the keren Ichtalmout, the heirs may withdraw the amount accumulated in the fund.
4. A "young fund" (a single fund less than 6 years old) can be withdrawn on the basis of an old fund (already 6 years old). Only if no parallel deposits have been made in the 2 funds and no withdrawals have been made from the old fund.

What happens if the amount is withdrawn before the end of 3 years?

• Withdrawals from the keren ichtalmout before the end of the three-year period are subject to a withholding tax of 47% of the total amount: fund + profits, including the employee's share of contributions.
• With seniority ranging from 3 to 6 years, the amounts are initially taxed at a rate of 47% on the entire balance. With the exception of the salaried portion and the portion already taxed. (if applicable, if the monthly contribution exceeds the threshold authorized by the Israeli tax authorities).

Tax advice and optimization for your Keren Ichtalmout in Israel

Unlike a withdrawal of the amount contributed to the pension fund before the legal age, where the withholding tax deduction will not be less than 35% (minimum 35% or marginal tax depending on the maximum).
A withdrawal before the end of your Keren Ichtalmout's 6-year term, which is not authorized according to the criteria explained above, will be taxed at the marginal rate.

However, since the fund automatically deducts at source a tax rate of 47% (for those who do not have a deduction at source certificate issued by the Israeli tax authorities). Most people will inevitably make a tax refund if their marginal tax rate is below 47%.

It is therefore advisable to file a tax return for the year in which the Keren Ichtalmout is withdrawn, in order to recover part of the overpaid tax, or in some cases the entire amount.

See also: how to calculate your taxes in Israel?

Tip: Remove your Keren Ichtalmout - why not?

What if you didn't have to withdraw the money from your Keren Ishtalmout after all? Here's how to make the most of the funds available in your Keren Ishtalmout.

The Keren Ichtalmout fund actually allows you to take out a balloon loan from 80% to 85% of the amount you've accumulated. This loan is at a preferential rate of "prime minus 0.5%" (1.25% net in Nov 2019). All the while, your remaining funds (which have not been withdrawn since you took out a loan) in the fund are generating an average return of 4% to 10%, depending on the period. So we get an incremental return of 3% to 9% per year without too much effort.

And above all, without "breaking" the age of your fund.