Income Tax Ordinance [New Version]

No deduction shall be allowed in respect of expenditure under sections 17–27 in an amount exceeding that which is required for the purposes of producing the income of the taxpayer; and on any question relating to this section the Director shall decide; provided that nothing stated in this section shall be construed as preventing any person who considers himself aggrieved by the Director's decision from appealing against it in accordance with the provisions of sections 153–158.

The Minister of Finance may, with the approval of the Finance Committee of the Knesset, make Regulations — whether generally or for categories of taxpayers — regarding the restriction or disallowance of the deduction of certain expenditure under sections 17 to 27, and in particular regarding —

In determining the taxable income of a person, no deductions shall be allowed in respect of —

"expenditure integrally linked and intertwined in the process of generating income" — expenditure that is integrated in the natural process of generating income and in the natural structure of the income source, and that constitutes an inseparable part thereof;

"meal and subsistence expenses" — expenses incurred by an individual in respect of his meals, whether incurred at the place of earning or outside it, excluding expenses in respect of breakfast included in the price of accommodation that is allowed as a deduction;

The provisions of sub-paragraphs (1) and (2) shall apply also with respect to a person in respect of whom two years have not yet elapsed since the day on which he ceased to be a member. Notwithstanding the foregoing in this paragraph, the Director may direct otherwise if he sees fit to do so in the circumstances; for the purposes of this paragraph —

"controlling shareholder" — one who holds, directly or indirectly, alone or together with his relative, any of the following:

"relative" — as its meaning in section 76(d);

"member" — a controlling shareholder who, alone or together with his spouse, or whose spouse has, directly or indirectly, at least 5% of the issued share capital or of the voting power or of the right to hold or acquire any of those or of the right to receive profits; provided that, for this purpose, the rights of a spouse acquired before marriage or received by inheritance shall not be taken into account;

"determining salary" — as defined in section 3(e);

For the purposes of this paragraph —

"preferred insurance" — insurance against loss of working capacity, and if the insurance was purchased before the insured reached the age of 60 years, the following two conditions are also fulfilled in respect of the insurance:

"insurance against loss of working capacity" — as defined in section 3(a);

"average wage in the economy" and "employer's contribution component" — as defined in section 3(e3)(2);

"salary" — employment income, excluding the value of the use of a vehicle placed at the disposal of the employee;

"provident fund" — (Repealed)

"expense in respect of the grant of shares or a right to receive shares" — the total annual expense to be recorded in the financial statements in respect of the grant of shares or a right to receive shares to a senior office holder or employee, all in accordance with generally accepted accounting principles;

"expense in respect of retirement grants" — an expense in respect of employer payments to a provident fund as their meaning in section 17(5) or in respect of a retirement grant or a death grant as their meaning in section 9(7a);

"generally accepted accounting principles", "senior office holder", "financial corporation", and "related corporation" — as defined in the Remuneration of Office Holders in Financial Corporations (Special Approval and Disallowance of Expenditure for Tax Purposes in Respect of Exceptional Remuneration) Law, 5776-2016;

"excess salary cost" — the gap between the cost of salary and two and a half million new shekels, provided that the cost of salary exceeds two and a half million new shekels;

"cost of salary" — salary, as well as any amount paid by an employer to a study fund or to a provident fund, even if under section 3 it is not regarded as employment income at the time it was paid to the study fund or to the provident fund, and also the amount of insurance contributions paid by an employer on behalf of his employee under the National Insurance Law [Consolidated Version], 5755-1995;

"salary" — each of those listed in paragraphs (1) to (3) below, other than a right to purchase an asset as its meaning in section 3(i) and a share as defined in section 102, given to a senior office holder or to an employee in connection with his employment or tenure in a financial corporation, whether directly or indirectly, including through a company under his control —

"payment ceiling" — two and a half million new shekels per year and a proportionate part of that amount in respect of part of a year, less the expense in respect of the grant of shares or a right to receive shares, and less the excess salary cost.