The training fund is one of the types of provident fund in Israel.
This is an investment arrangement that is often used for savings.
Other types are the various pension funds.
Those who save in these financial instruments are given tax benefits.
The training fund is intended for both employees and the self-employed.
It is exempt from tax on capital gains for employees.
The percentages of the provision for the continuing education fund are determined within the framework of the employment relationship between the employee and his employer.
The maximum allowed deposit is 5% on the part of the employee and 7.5% on the account of the employer.
That is, the employee's deposit is in a ratio of at least 1:3 to the employer's deposit.
Bank of Israel, Photo: Reuters
The self-employed can also deposit up to 4.5% of the salary to the Self-Employed Training Fund, and this is a recognized expense.
The annual deposit ceiling is NIS 12,150 (as of 2022) which is 4.5% of NIS 270,000.
A deposit to a training fund for the self-employed does not require a fixed deposit every month, but you can choose between one deposit per period of lump sums and a monthly deposit.
Profits accumulated in the fund are exempt from capital gains tax if the amount deposited annually did not exceed NIS 18,960 and the funds were withdrawn after 6 years of service or after 3 years of service for the purposes of studies or further training.
The training fund is currently the only tax-exempt capital savings, including tax exemption on real profits.
It is possible to partially withdraw the accumulated funds, starting from the date of eligibility (3 or 6 years), but this account in the fund will be blocked for further deposits.
If the member of the fund wishes to continue to set aside - he must open an additional account to which the above rules will apply.
There is no obligation to withdraw
However, there is no obligation to withdraw the training fund and it can be used in the future for various needs, such as part of the pension savings, and more.
In the training funds, there are investment routes with different levels of dispersion and risk.
Management of the training fund involves the payment of management fees.
Find out what the cost is and if it is the best for you.
Funds can be transferred from one training fund to another with the same asset manager or with another manager and the transfer is not considered a tax event, while the customer's seniority is preserved.
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