Last Updated on October 22, 2021

Keren hishtalmut – A tax-free savings plan

Hebrew: קרן השתלמות

What is a Keren Hishtalmut?

A Keren Hishtalmut is a short term tax free saving plan available in Israel.

How does it work?

Both employer and employee contribute to the savings plan. The fund accumulates for 6 years.  At the end of the 6th year you are able to withdraw the money from the fund without paying Capital Gains Tax.  If you make a withdrawal prior to the end of 6th year, you are liable for tax penalties.

Do I qualify for a Keren Hishtalmut?

1. The Keren Hishtalmut was originally made available for government employees, academics, teachers etc., who are likely to take a sabbatical year.  So you contribute for 6 years and withdraw for use in the 7th or Sabbatical year.
2. Regular salaried employees, depending on the terms of their employment contract, may also contribute to this savings plan.  The employer also makes a contribution.  For the employer, his portion/contribution is tax deductible.
3. An employee who have a significant financial interest in the company is can also have a Keren Hishtalmut.  Rules, regulations and tax benefits for this type of employee differ slightly to those for regular salaried employees.
4. Business Owners – Self Employed: A self-employed – Atzmai – in Israel can also have a Keren Hishtalmut which affords them certain tax benefits.

Our Tip

Their are various contribution levels depending on your status – take the advice of a tax consultant, accountant or investment advisor before you sign up for a Keren Hishtalmut.

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