Keren Ishtalmout - Why contribute?

What is Keren Ishtalmout?

A Keren Ishtalmout is a tax-efficient Israeli savings account for individuals. If you meet the conditions, you'll not only save tax when you invest money, but you'll also save tax while your savings are generating profits.

After several years, you can withdraw the money tax-free and spend it as you wish. Keren Ishtalmout's tax benefits are designed to encourage employees and the self-employed to save a small portion of their income each year.READ ALSO: TAX BENEFITS IN ISRAEL FOR PENSION CONTRIBUTIONS / KEREN ISHTALMOUTE

What are the tax benefits of Keren Ishtalmout?

1. The amount you deposit in your Keren Ishtalmout will be treated as a tax-deductible expense in the year the deposit is actually made.
2. Profits accumulated in your Keren Ishtalmout savings account will not be taxed.
3. Once 6 years have elapsed since you opened your account, you can withdraw all savings and accumulated profits, tax-free.

Here's an example to help you understand:

Imagine you have an annual taxable income of ILS 200,000 and you deposit ILS 9,000 in a Keren Ishtalmout savings account:

The 9,000 shekel deposit in your Keren Ishtalmout is treated as an expense. As a result, you won't pay tax on your total income of 200,000 shekels, as your taxable income will be reduced to 191,000 shekels. (We remove the contribution placed in your Keren Ishtalmout).

So you'll only pay income tax on what's left in your pocket, i.e. 191,000 shekels.
On the other hand, the company in which you invest your Keren Ishtalmout will invest your 9,000 shekels (in the stock market, stocks, bonds, real estate funds in Israel, etc.) and will generate profits.

This profit is created with your money, and the investment company (Migdal, Klal, Menora, Phoenix, to name but a few) is remunerated by the profit made. It puts your money to work and is remunerated via performance and the amount invested.

For tax purposes, let's say the total profit accumulated over 6 years is 5,000 shekels. So your balance will be (9,000 + 5,000) 14,000 shekels.
After 6 years, you can withdraw the full 14,000 shekels tax-free.

For your information, Keren Ishtalmout performance varies according to the level of risk and the performance of the investment company. If you would like to receive recommendations, please fill in the form below.

READ ALSO: SELF-EMPLOYED WORKERS IN ISRAEL MUST CONTRIBUTE TO THEIR PENSIONS.

How much can I deposit each year on my Keren Ishtalmout?

Although Keren Ishtalmout's tax benefits are excellent, there is a limit to the amount you can deposit each year and still benefit from the tax advantages.

Deposits in a Keren Ishtalmout will be treated as a tax expense (so you save income tax on this income) provided your total deposits for the year meet the following conditions:
- no more than 4.5% of your taxable income, and
- less than a total of 11,835 ILS (2022).
You can deposit more than the limit if you wish, although the excess is not treated as a tax expense.

However, profits generated on the savings account will still be tax-free provided your annual contribution does not exceed 18,480 ILS (from 2022).

Watch out!

Your contributions to Bitouah leoumi are not your retirement in Israel.
The amount saved in a private fund will actually be your pension.

When can I withdraw funds from my Keren Ishtalmout?

Once 6 years have elapsed since the Keren Ishtalmout was opened, you can withdraw all the funds in the account tax-free. There are no restrictions on spending the funds, and you can withdraw both capital and accumulated profits for any purpose without paying tax.

A few tips

1. The first year is considered a full year, even if the account was only opened during the year. For example, if you open the account in December 2022, you can withdraw the funds tax-free at any time from January 1, 2028.
2. Once 6 years have elapsed since your first deposit, you can withdraw all funds from the account, even deposits made more recently.
3. We recommend that self-employed people in Israel who invest an annual amount invest this amount at the beginning of the year. This way, you earn the interest earned during the year of deposit as well.
4. We recommend that self-employed people in Israel give priority to this investment over all others, at least up to the annual limit. It's an investment encouraged by the Israeli government, so you might as well help yourself :-).

The above should not be construed as a recommendation and/or opinion and, in any case, it is recommended to obtain personalized professional advice. We will be happy to be at your disposal for any questions and/or clarifications on this subject and in general.Ossek patour guideThe Ossek Mourche guide