The assumption is that foreign workers should pay to receive the national insurance coverage in Israel.
The upper income limit for Israeli national insurance and social security purposes was increased at the beginning of 2010 from NIS 76,830 to NIS 79,750 per month. The income limit for reduced rates of national insurance was increased from NIS 4,757 to NIS 4,809 per month.
Moreover, on January 14, 2010, the National Insurance Institute issued new instructions to employers of foreign employees who don‘t have Israeli identity cards. If the employees come from countries which have a social security treaty with Israel, the employer must report and pay full national insurance and social security contributions the same as for Israeli resident employees. However, there is no need to pay the supplementary health levy normally added on to national insurance contributions.
The countries which have social security treaties with Israel are as follows: Austria, Uruguay, Belgium, Britain, Germany, the Netherlands, Canada, the Czech Republic, France, Switzerland, Finland, Sweden, Norway, and Denmark.
The assumption is that foreign workers should pay to receive the national insurance coverage in Israel. The home treaty country should then give a relief to prevent double national insurance/social security contributions on the income concerned.
For foreign workers from other countries, minimal national insurance rates will continue to apply as the national insurance coverage will be correspondingly reduced – only work injuries, bankruptcy and maternity.
Consequently, the national insurance contributions due, within the above income limits, are now expected to be as follows.
For Israeli resident employees the employer pays a range of 3.85 percent to 5.43% and the employee pays a range of 3.5% to 12%. In the case of foreign employees from treaty countries, the employer pays between 3.85% and 5.43% and the employee pays between 0.4% and 7%.
In the event of foreign employees from other countries the employer pays between 0.54% to 0.77% and the employee pays between 0.04% – 0.87%.
Israeli resident freelancers (52% tax deductible) pay between 9.82% – 16.23%.
Israeli resident non-employed investors (52% tax deductible) pay between 9.61% – 12%.
Employers will need to get organized rapidly. The Israeli national insurance rates are higher for foreign employees from countries that have a social security treaty with Israel (such as British, Canadian or French employees) than for other foreign employees (such as Americans, South Africans or Australians). Employers must also arrange identity numbers for their treaty country employees according to the new instructions.
Foreign employees in Israel will also need to get organized rapidly and clarify the following questions: do they need private comprehensive health cover? Do they need to claim social security treaty relief in their home country?
As always, consult experienced tax advisers in each country at an early stage in specific cases.
The writer is an international tax specialist at Harris Consulting & Tax Ltd.