Israel’s Chief of Staff ordered a pay raise of 21% for all conscripted (sadir or chova) soldiers, starting in January 2014. Their pay has not been updated since 2002, while salaried employee’s pay has been updated a few times since then.
a few examples:
combat soldiers will earn 847 sh (700 sh- up until Dec 2013)
level A combat support soldiers will earn 618 sh ( 511 sh -up until Dec 2013)
non-combat soldiers will earn 426 sh (352 sh -up until Dec 2013)
According to income tax regulation 2: “all employees are required to fill out an employee card (101 tax form) at the start of employment with a new employer and on the 1st of January of each subsequent year. The form includes: the employee’s personal information and sources of income. In addition, the employee is required by law to report any change in the information supplied on the form, within a week of the change.” Responsibility for the accuracy of the information is the employee’s only. The employee signs at the end of the 101 form a statement stating that all the information is correct. Supplying incorrect information is a criminal offense. The 101 tax form has instructions, but they are not too explicit. Employees who do not understand what or how to fill out the form should ask the payroll accountant for help. Veteran payroll accountants attach written instructions to employees along with the form, correctly knowing that any mistakes in filling out the forms will come back to them in the end and they will need to chase after employees to “get it right” or deduct maximum tax, which just causes extra work.
Most employers have issues with employees filling out their annual 101 tax form. In some instances they leave out important mandatory information, in other cases they forget to check the boxes regarding the type of payment they are receiving from the employer or whether they have any other source of income. These things, while correctable in most cases during the tax year, can be very problematic in that until they are rectified, they may incur a maximum tax deduction from the employee’s salary. There can even be serious repercussions, by way of unnecessary fines in the case of an audit by the tax authorities.
The employer in general, and the payroll accountant specifically need to ensure that the proper form is being used (it’s updated frequently and can be found under “forms” on the Tax Authority’s website: http://taxes.gov.il/Pages/TaxesFastForms.aspx
It is important to note that each time a tax form is updated, all previous versions become obsolete and invalid from that point on. Using an outdated form can also result in fine ! However, all computerized payroll systems have the option of printing out pre-printed 101 forms with both the employer’s info as well as the employee’s info as it appears in the program. This is actually a time-saver as it allows the employee to double-check and correct only when information is incorrect or has changed, check the relevant boxes and sign the form, instead of filling out the form from scratch. This usually takes only a few moments. The responsibility for updating the 101 form in the payroll program is the Program’s responsibility.
The employer is responsible for keeping these forms on file along with any letters from the tax authority regarding their employees tax credits, exemptions or reconciliations.
Good news !
The tax Authority has launched an initiative that will not only simplify the 101 tax form process, but it will ensure zero mistakes and do away with the need to get the forms to the employees and get them back in a timely manner, as well as eliminating the need to keep them on file, thus saving space and becoming environment friendly (no more paper) !
So how does this work ?
The tax Authority issued instructions for procuring an electronic 101 tax form which is available here:
http://taxes.gov.il/IncomeTax/Pages/IncoeTaxMeidaMaasikim.aspx
look for the item dated May 20, 2012 – there are two. the top one is the one you need (9 page document) and it includes the application form for the employer (pages 8 and 9)
As of Jan 2013, this is voluntary, but highly recommended. Keep reading…….
The employer needs to fill out a request to be included in the criteria for filling out electronic 101 forms and use the system. The request needs to be submitted to the Tax Authority not later than 2 months prior to the end of the tax year in order to use the system for the next year.
(Employers who wish to develop their own system for electronic 101 tax forms or companies who sell payroll programs, or the use of them to employers need to submit 4 months prior to the end of the tax year)
The process
After submitting the form, the employer will receive written approval from the Tax Authority along with access codes to a secure site and instructions. In general, employees can access the secure site via a unique and personal password ensuring privacy. the employee will update all personal and income information. Any time there is a change in an employee’s information, the employee will log onto the secure site and repeat the process, changing the necessary information. All forms after finalization by the employee become locked PDF files and each update becomes a newer version. All versions are kept on-line and accessible to both the employer and the employee. In cases where employees do not complete the process, it will automatically incur maximum tax (currently 48%) on the employee’s annual salary.
The above information is taken from the Israel Tax Authority’s publications and is not a translation of those publications.
Disclaimer: Israpay has done it’s best to explain this issue in easy to understand terms, however should any discrepancy be found between the information contained in this blog post and the Tax Authority’s referendums and notifications to employers, the latter will prevail. This information is intended as a service and is not legal advise in any way or form. It reflects the author’s opinion only and is not to be taken as more than general information and a friendly recommendation that may be worth checking out. There may be restraints, in the employer’s payroll program or otherwise, that currently will not enable the employer to currently implement use of the electronic 101 tax form.
In order to widen our services to a broader audience, we have successfully upgraded to a Multilingual site and Integrated Hebrew into the site.
The Hebrew pages are currently in draft mode and not visible yet.
As we post the translated pages, they will be posted and become visible. Thank you for your patience.
Enjoy !
Your comments are always most welcome
Moshe
The mandatory pension rates have been updated from Jan 2013 onwards as follows:
Employee – 5%
Employer – 5% + additional 5% towards severance pay.
total 15%
This is the 6th update out of 7. The law which began in Jan 2008 to ensure a pension to all salaried employees in Israel.
In 2014, the last update will come into effect.
2013 Tax Brackets
The value of each tax credit point has been updated to 218 sh.
These changes are effective from Jan 1, 2013 (January 2013 salary).
|
Tax Bracket |
Gross pay |
Tax |
|
10% |
5,280 |
528 |
|
14% |
9,010 |
1,050 |
|
21% |
14,000 |
2,098 |
|
31% |
20,000 |
3,958 |
|
34% |
41,830 |
11,380 |
|
48% |
Each additional sh |
As of Jan 1st, 2013 the amounts exempt from garnished wages have been updated as follows:
single – 2,122 sh
widower/divorced/single parent + 1 child – 3,432 sh
widower/divorced/single parent + 2 or more children – 4,281 sh
couple – 3,183 sh
couple + 1 child – 3,692 sh
couple + 2 or more children – 4,201 sh
Notes:
1) The above amounts do not apply to garnished wages for alimony.
2) Should the above amounts be more than 80% of the monthly salary (after deductions for income tax and social security and health tax) the amount exempt shall be reduced to 80% of the actual monthly salary.
source: protection of salary law, 1958 update 2013
On Aug 13, 2012 The “law for reducing the national deficit and change of the burden of tax 2012” was made public.
This law goes into affect on Jan 1, 2013 and includes 2 items regarding employees:
1) A change in the tax brackets for salaried employees as follows (amounts are from total gross pay):
up to 62,400 sh annually – 10%
from 62,401 sh – 106,560 sh annually – 14%
from 106,561 sh – 168,000 sh annually – 21%
from 168,001 sh – 240,000 sh annually – 31%
from 240,001 sh – 501,960 sh annually – 34%
from every additional sh – 48%
2) Anyone making annual income which exceeds 800,000 sh will incur an additional 2% tax on the amount over 800,000 sh
Great news for all salaried employees who earn minimum wages. After the govt. raised the v.a.t. and the latest price hikes in almost everything we buy, The minister of Industry, Trade and Labor, Shalom Simchon announced today that the minimum wages will be raised from October 1st, 2012. This is the last update according to the last labor agreement signed two years ago between the Histadrut Haklalit and the Israeli Government and the Industry Union. The last update of the minimum wage was in July 2008.
The new hourly rate will be 23.10 sh (prev. 22.04)
The new monthly rate will be 4,300 sh (prev. 4,100) – a 4.9% increase.
This also effects the hourly rate for youth, as follows:
up to age 16 – 3,010 sh
up to age 17 – 3,225 sh
up to age 18 – 3,569 sh
This notification was issued early, prior to the Jewish new year (Rosh Hashana) and according to the Central Bureau of Statistics will effect about 600,000 employees in Israel.
Change in Employer’s contribution to Social Security
As part of “the law to reduce the national deficit and change in the burden of taxes”, which was published today – August 13, 2012, a raise in the employer’s contribution towards Social Security has been authorized for the next 3 years, as follows:
From the higher level (on the part of salary over 60% of the average wage)
In 2013 – 6.5%
In 2014 – 7%
In 2015 – 7.5%
The current rate in 2012 is 5.9%.
This does not include employees who are pension-age, receiving a old-age stipend from Social Security or foreign workers or employees under age 18.
If you are a company executive or officer and your job entails employing workers this post is for you,
It is your responsibility to be updated, to know and be familiar with the latest laws, regulations and court verdicts in this field.
You must control, oversee and issue directives in order to notify the company where you are employed that they are acting legally or not.
New regulations will be coming into effect on June 19th 2012 which call for closer control and inspection by the Ministry of Trade, Industry and Employment for violations of mandatory labor laws in Israel.
Violators will be prosecuted, including company officers or executives, personally ! This is a criminal offense and can be punished with administrative fines of up to 35,000 shekels for each offense or even jail time.
It is your duty to do everything in your power to make sure that the law is adhered to. Do not play around with employee’s rights, it is not worth the risk of the good name of your company.
The Ministry has allocated a special tab on the menu of their website where they will publish the names of all employers who have violated the law !
Potential employees who are searching for a job can check this site to see if the employer is listed – they might get an indication whether they want to work for such an employer or not.
As of Jan 1st, 2012 the amounts exempt from garnished wages have been updated as follows:
single – 2,093 sh
widower/divorced/single parent + 1 child – 3,384 sh
widower/divorced/single parent + 2 or more children – 4,221 sh
couple – 3,139 sh
couple + 1 child – 3,641 sh
couple + 2 or more children – 4,143 sh
Notes:
1) The above amounts do not apply to garnished wages for alimony.
2) Should the above amounts be more than 80% of the monthly salary (after deductions for income tax and social security and health tax) the amount exempt shall be reduced to 80% of the actual monthly salary.
source: protection of salary law, 1958 update 2012
Good news for employees who were forced to take time off work due to illness:
Update #4 – 2011 of the sick pay law, effective April 1, 2011 incurs a change in the rates paid:
1st day – no pay (no change)
2nd + 3rd days – 50% of regular pay (up from 37.5%)
4th day onwards – 100% of regular pay (up from 75%)
In addition, employees who work a 5 day week – 21 2/3 days will be considered a full month (entitling employee to 1.5 sick days credit). If an employee did not work a full month the credit will be prorated accordingly. (This is a change from previously 25 days = a full month)
Notes:
