Israeli Tax Alerts | Practical Interpretations | 2008-2020

79 Finance Committee, it is possible that terms and conditions shall be determined regarding the designation of the Released Profits for growth-generating investments in Israel. (September 2012) Recent far-reaching changes in the Israeli tax laws following the Budget Legislation We wish to bring to your attention some of the significant changes in the Israeli tax legislation, as part of recent legislative amendments which are related to the state budget for 2013-2014 (“the Budget Legislation"). The changes will enter into force as of January 1 st , 2014 (unless otherwise stated). Within the Budget Legislation, the Income Tax Ordinance ("ITO") and the Real Estate Taxation Law ("RETL") were amended. The changes are set forth below in summary format: 1. Increase of tax rates: 1.1 Increase of the corporate tax rate by 1.5%, from 25% to 26.5%. 1.2 For individuals, the tax rate in each bracket will increase by 2%. This means that the tax brackets for active incomes will range from 11% to 50% and for passive incomes, from 32.4% to 50%. In addition, it shall be noted that according to a legislative change that passed a few months ago, from 2013 a “surcharge” at a rate of 2% applies to an annual income in excess of NIS 811,000 (approximately $225,000), with some exceptions. 2. Trusts: Within the amendment to the Trusts Chapter in the ITO, the following amendments were adopted (generally, the new provisions will apply as from 2014, with some exceptions): 2.1 Today, as a rule, a foreign-resident settlor trust (that is a trust in which all settlors are non-Israeli-residents, irrespective of the identity of the trustee or beneficiaries), is considered to be a foreign resident for tax purposes (and therefore is exempt from taxes on income that was generated outside of Israel and also from certain income that was generated in Israel). The definition of a “foreign-resident settlor