Tax Alert No. 7 - 

International taxation  28.3.2010

Tax treaties from the Social Security standpoint - 28.3.2010

Israel is signed on social security treaties with many countries. These treaties regulate the social security rights of who ever emigrates from one country to the other to live there temporarily or permanently. The types of insurance regulated in the treaties are as follows: old-age, survivors, children, work injury, maternity, general disability etc’

Important Principles in different treaties:

1. When an Israeli employer sends his employee to work abroad in a treaty country– the Israeli employer has to continue and pay both national security and health insurance in Israel, for the employee, according to the national security law. the employee is exempt from paying the national security in the treaty country. The exempt period is determined according to a special arrangement in the treaty.

2. An independent worker or a salaried employee for a foreign employer in a treaty country – the insurer pays the national security in the treaty country. According to the provisions of the treaty he will be exempt from paying national security in Israel. Despite that fact, he will still have to pay the health insurance in Israel throughout his stay abroad. The insurer has to address his local national insurance institution, according to his living area, to arrange the payments.

3. Public service employees, airline companies and diplomats – the employers of employees, who are sent to work in a treaty country, have to pay national security and health insurance in Israel, with no limitation period. The employees are exempt from paying these payments.

4. A foreign employee of a treaty country that comes to work with an Israeli employer – as of January 1st, 2010, there is an obligation to report on these employees as on regular Israeli employees, excluding health insurance. The employee has to continue and pay his health insurance in his own country.

5. A foreign employee of a treaty country who is sent by a foreign employer of a treaty country if the foreign employee has a legal delivery address in Israel, the same rules of an Israeli employer will apply. If there is no legal delivery address in Israel, the employee will have to pay his own social security. In any case since health care does not apply on foreign employees, he has to pay it individually.

Other issues regulated in the social security treaties:

Export allowances, which allow allowances payment the insured is entitled to, even in the other country.
Combining periods of insurance in both countries, to enable the realization of rights and payments of pensions.
Medical hospitalization: after an injury at work or for giving birth.

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