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In recent days, the tax authority published a number of new benefits for the public saving for retirement, but the discourse on the deficit in the state budget and updates on the war situation diverted the discussion from this positive aspect.
First, the deposit ceiling for the public's savings channels was updated, with an emphasis on pension savings.
The savings threshold was updated upwards at a rate of 3.34%.
This means that profits accrued in 2024 will be exempt from tax in a higher amount compared to previous years, meaning that a larger capital gain will be exempt from tax.
Recall that only profits that exceed the ceiling are subject to capital gains tax, and as the ceiling of the tax-exempt amount increases, the amount of tax on the profit decreases.
Thus, in 2023 the annual deposit ceiling for the provident fund for investment stood at NIS 76,905 and in 2024 the deposit ceiling was updated to NIS 79,006.
It is important to understand that the meaning is that these are thousands of additional shekels that can be saved every year, that the profits that will be accumulated in respect of those investments will be exempt from tax in 2024 and in the years to come, this is of course assuming that the capital market will generate profits in the various investment channels.
Thousands of additional shekels can be saved every year with tax exemption/ShutterStock
Another update concerns provident funds for investment and refers to the minimum amount of allowance required to withdraw the full amount of savings in a provident fund.
Now, the deposit ceiling has increased for those saving in the provident funds, who meet the condition of withdrawing the amount in the fund at once.
If they are 60 years of age or older, the amount required for them to be able to withdraw all the funds in the fund is savings sufficient at least for a monthly pension of NIS 5,012 compared to NIS 4,850 in 2023.
The amounts for those saving in the continuing education funds have also been updated.
There are two benefits in the deposit to the training funds: one, recognition of a significant part of the annual deposit amount as a recognized expense (deduction) for income tax purposes.
The second benefit is an exemption from capital gains tax on profits accumulated in the training funds for the self-employed.
In 2024, the maximum deposit ceiling for the continuing education fund will increase to a total of NIS 20,520 instead of NIS 19,920 in 2023.
Over the years, these two benefits have made continuing education funds very popular among the self-employed public.
It should be noted that the benefits have been "chased" for many years by the tax authority, which seeks to cancel them, but still without success, so these significant tax benefits still remain in place and one must be vigilant for legislative changes in the future.
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In addition, the Tax Authority announced that it is carrying out a digital revolution in employee retirement procedures: no more form 161 on paper, but form 161 with a digital signature of both the employee and the employer.
The Authority has completed the development of a digital and innovative platform that will allow the public to conduct business in an easier, friendlier and faster manner through digital signatures.
The system will enable online, fast and accurate reception of the employer's reports that are adapted to form 161, one of the most important forms for the employee since in it the employer details for the tax authorities the compensation money deposited to the employee's pension arrangement, as well as retirement grants, if he is entitled to them.
This move will also make it easier for the employee in the process of making his decisions regarding the amounts available to him following his retirement.
As mentioned, the entire process is online without the need to submit manual forms and without the need, in most cases, to go to the assessor's office.
The process is simple and easy: the system allows employers to report, online, part A of form 161. The report will be recorded immediately in the tax authority's computer systems.
After receiving the report from the employer, the employee will receive a text message or email from the tax authority about this.
Now, the employee will be able to enter the system, view the data and make decisions regarding the retirement amounts he received from the employer. At the end of the process, the employee and the employer will be notified that the relevant certificates are available in the system.
The author is a founding partner CPA office Ronen Lentz - Patel and a candidate for the presidency of the CPA office
More on the same topic:
pension
Tax Benefits
Internal Revenue Service
Education fund
taxation
retirement