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?
- The Keren Hishtalmut was originally made available for government employees, academics, teachers etc., who are likely to take a sabbatical year.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.
- 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.
- 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.
- Business Owners – Self Employed: A self-employed – Atzmai – in Israel can also have a Keren Hishtalmut which affords them certain tax benefits.
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.