As of 2017, Atzmaim (self-employed) are obligated to make pension contributions. In addition, they are entitled to other social benefits such as Keren Histalmut. The breakdown of contributions for the 2019 tax year can be found below.
How much am I obligated to contribute?
The income upon which one is obligated to contribute is split into 3 tiers. All of which are based on the Schar Memutza BaMesheq – שכר ממוצע במשק. This is the defined ‘average’ gross salary in Israel. The average gross salary for 2019 is 10,273 NIS (as publicized by Bituach Leumi).
The 3 tiers are:
- Half the Schar Memutza BaMesheq.
- The 2nd half of the Schar Memutza BaMesheq.
- Anything above the Schar Memutza BaMesheq.
|Average monthly income
(based on January 2019 data)
|Minimum legal contribution (%)||Minimum Legal Contribution (NIS)|
|0 NIS – 5,137 NIS||4.45% of the average monthly income||Up to 229 NIS per month (based on 5,137 NIS x 4.45%)|
|5,137 NIS – 10,273 NIS||4.45 % of income up to 5,137 NIS, and 12.55% of income earned above 5,137 NIS||Up to 873 NIS per month (based on 5,137 NIS x 4.45% and 5,137 NIS x 12.55%)|
|Above 10,273 NIS||8.5% of 10,1273 NIS||873 NIS per month|
Can I contribute more than the legal obligatory pension?
Yes. The amounts stipulated above are minimum contributions. For the 2019 tax year, the upper limit for tax benefits based on pension contributions for an Atzmai is 16.5% of a monthly income of 17,600 NIS (211,200 NIS annually). By contributing more than the minimum obligation, one can benefit from increased tax benefits and a larger future pension.
An Atzmai has the ability to open up a Keren Hishtalmut based on 7% of their income. The tax year in Israel runs from 1st January to 31st December. The upper annual limit for total contributions into the Keren Hishtalmut for 2019 is 18,480 NIS. Contributions equating to the first 4.5% of one’s annual income up to 264,000 NIS is considered a tax deductible expense.