Income Tax Ordinance [New Version]

"tax benefit" – a tax credit or a deduction from income or tax rates lower than the rates prescribed in section 121;

"grant for work productivity" – a grant, benefit or bonus that is employment income paid under a contract of employment approved for the purposes of this Section as prescribed in Regulations, in addition to the customary salary or wages fixed in the contract of employment, for work productivity exceeding normal productivity and determined according to measured norms approved by the Institute for Work and Production Productivity, or another body designated for this purpose by the Minister of Finance on the recommendation of the Institute;

"second and third shift" – as defined by the Minister of Finance in Regulations, after consultation with the Minister of Labour and Welfare.

"residential apartment" – as defined in section 9(c) of the Land Taxation Law;

"soldier" – a soldier serving under a commitment to regular service in the Israel Defence Forces, a police officer, including a Border Police officer in the Israel Police, a prison officer, and also an employee in the General Security Service or in the Institute for Intelligence and Special Operations, provided that they are serving in the combat array;

"beneficiary settlement" – a settlement in which, on 31 December preceding the tax year in respect of which the credit under this Section is granted, all of the following conditions are met:

"border-adjacent settlement" – a settlement whose residential apartments within its boundaries, all or some, are situated within 7 kilometres of Israel's border with Jordan, Syria or Egypt or of the security fence surrounding the Gaza Strip, or within 9 kilometres of Israel's border with Lebanon, all measured in a straight line;

"urban settlement" – a municipality or local council, excluding a regional council;

"urban settlement in the Negev" – a municipality or local council, excluding a regional council, belonging to the Southern District as determined in the notice on the division of the territory of the State into districts and sub-districts and the description of their boundaries, under section 3 of the Law and Administration Ordinance, 5708-1948;

"urban settlement adjacent to a northern confrontation border" – a municipality or local council, excluding a regional council, assigned to cluster 6 or to a lower cluster in the socio-economic ranking, belonging to the Northern District as determined in the notice on the division of the territory of the State into districts and sub-districts and the description of their boundaries under section 3 of the Law and Administration Ordinance, 5708-1948, whose residential apartments within its boundaries, all or some, are situated within 9 kilometres of Israel's border with Lebanon, all measured in a straight line, provided that it is not a settlement adjoining a northern confrontation border;

"settlement adjoining a northern confrontation border" – a settlement whose residential apartments within its boundaries, all or some, are situated within 2 kilometres of Israel's border with Syria or Lebanon, all measured in a straight line;

"urban settlement adjoining a northern confrontation border" – a municipality or local council, excluding a regional council, assigned to cluster 6 or to a lower cluster in the socio-economic ranking, whose residential apartments within its boundaries, all or some, are situated within 2 kilometres of Israel's border with Syria or Lebanon, all measured in a straight line;

"peripherality index" – the peripherality cluster of local authorities according to the publications of the Central Bureau of Statistics, in respect of each settlement, and in respect of a settlement within a regional council – according to the publications of the Central Bureau of Statistics in respect of each settlement in the regional council or in respect of the regional council, whichever is lower;

"socio-economic ranking" – the characterisation of local authorities and their classification into a cluster according to the socio-economic level of the population according to the publications of the Central Bureau of Statistics in respect of each settlement, and in respect of a settlement within a regional council – according to the publications of the Central Bureau of Statistics in respect of each settlement in the regional council or in respect of the regional council, whichever is lower;

"special salary" – a salary that includes a level-A activity supplement that was paid for a period of at least three consecutive months;

"total score", of a settlement – the total score of the settlement obtained by adding together the socio-economic score, the peripherality score and the border-proximity score of that settlement, rounded to the nearest whole number;

"socio-economic score" – 35% of the number of points set out below, as the case may be:

"border-proximity score" – 25% of the number of points set out below, as the case may be:

"peripherality score" – 40% of the number of points set out below, as the case may be:

"publications of the Central Bureau of Statistics" – the data appearing in the publications of the Central Bureau of Statistics known on 31 December preceding the tax year in respect of which the credit under this Section is granted; the Central Bureau of Statistics shall publish, by the 3rd of Tevet 5777 (1 January 2017), a peripherality index and a socio-economic ranking in respect of each of the settlements situated within the jurisdiction of a regional council, separately;

"level-A activity supplement" – a wage supplement paid to a soldier in respect of activity in the combat array in a development area, defined under the law applicable to the soldier as a level-A supplement and approved by the Administrator for this purpose;

"development area" – any of the following:

"resident", in a particular settlement – an individual whose centre of life is in that settlement.

A tax discount or benefit under sections 11, 11a or 11b shall not be granted in respect of income as referred to in Part 5-C or in respect of income as referred to in section 125c, if the rate of tax applicable thereto does not exceed 15%.

In this Section, "preferred income" – income from interest or from a dividend in respect of which a relief or exemption from tax is granted under any enactment.

"asset" – excluding an asset that came into the possession of the individual exempt from tax under section 97(a)(5) with effect from the 11th of Tevet 5767 (1 January 2007);

"veteran returning resident" – an individual who returned and became a resident of Israel after having been a foreign resident for at least ten consecutive years.

in this subsection –

"qualifying securities" – securities traded on a stock exchange, acquired by the returning resident during the period of his stay outside Israel after he ceased to be a resident of Israel, managed from an account at a banking institution, as well as securities traded on a stock exchange acquired by the returning resident out of income that is interest or dividend originating in qualifying securities or income that is capital gain from the sale of qualifying securities, deposited in that account;

"stock exchange" – a stock exchange outside Israel that has received approval from one who is authorised to grant it under the law of the state in which it operates, as well as a regulated market outside Israel;

"account at a banking institution" – an account at a banking institution in which no deposits have been made after the returning resident became a resident of Israel, except for the deposit of income that is interest or dividend originating in qualifying securities or income that is capital gain from the sale of qualifying securities;

"returning resident" – an individual who returned and became a resident of Israel after having been a foreign resident for at least six consecutive years.

Where a company whose control of its business and management is outside Israel has received in Israel income that was obtained or derived outside Israel, the Minister of Finance may, upon its application, direct that it shall pay tax at a rate not exceeding 15% of that income, and in special cases – even exempt it from tax.

The Minister of Finance, with the approval of the Finance Committee of the Knesset, may grant tax relief in respect of income of a social character or in respect of compensation received by an individual who is a resident of Israel, if paid to him by a foreign state or its welfare authority, and may also exempt such income from tax, all as he shall prescribe.

The Minister of Finance may, with the approval of the Finance Committee of the Knesset, direct that the interest and linkage differentials paid on a loan to which the revenues of the State are pledged shall be exempt from tax, either generally or only with respect to the interest and linkage differentials paid to foreign residents, and may also, with such approval, direct that the interest paid on a loan guaranteed for its repayment by a foreign state or by one whom the Minister of Finance has recognised as acting in the name of and on behalf of a foreign state, or interest on a loan received by the Jewish Agency for the Land of Israel, shall be exempt from tax.

The Minister of Finance, with the approval of the Finance Committee of the Knesset, may exempt from tax, in whole or in part, linkage differentials or interest in the amount of linkage differentials paid on classes of deposits, classes of savings plans and classes of bonds of classes of taxpayers, in accordance with conditions prescribed with such approval.

The Minister of Finance, with the approval of the Finance Committee of the Knesset, may prescribe a method for computing the part of interest exceeding the rate of increase of the index, subject to such conditions and adjustments as he has prescribed, and may prescribe as aforesaid in respect of classes of assets or in respect of classes of taxpayers, all according to the period of holding the asset or according to any other criterion.

The Minister of Finance may direct, by Order published in Reshumot (Official Gazette) –

The Minister of Finance may direct that tax be refunded, in whole or in part, to a person who is not a resident of Israel if the amount of tax that that person paid in Israel exceeds the amount allowed to him, by reason of that payment, in his country of permanent residence as a credit against the tax applicable in that country on his income that was obtained or derived in Israel, even if the amount was not allowed to him or was not given to him as a credit in his country of residence by reason of loss set-off provisions in that country.

The Minister of Finance, with the approval of the Finance Committee of the Knesset, may exempt from tax linkage differentials added to the amount of a debt or claim of classes of debts or claims as prescribed; for this purpose, "linkage differentials", in whole or in part – including interest, in a total amount not exceeding the amount that would have had to be added thereto according to the rate of increase of the consumer price index as referred to in section 159a(a), had the debt or claim been linked to the index for the relevant period.

The Minister of Finance may, by Order, with the approval of the Finance Committee of the Knesset, exempt from tax, subject to conditions prescribed in the Order, income from the sale of water by a person whose sole occupation is the supply of water.