Amendment 190

What is amendment 190?

Amendment 190 is an amendment of the Income Tax Ordinance that entered into force in the year 2012, and it refers to a variety of issues, including the provision of benefits during the taxation of allowances and their capitalization.

Amendment 190 allows to whoever passed the age of 60 and has a minimum pension (above NIS 4,405 in the year 2017) to deposit funds in a provident fund, which can be withdrawn as a lump sum minus an income tax of only 15% (on the nominal profit) instead of a real tax of 25% on investments in securities, or to withdraw a monthly allowance which for the entire life will be exempted from tax.

What are the terms according to amendment 190 for withdrawing from provident fund a lump sum (by way of capitalization of a recognized pension) or for withdrawing a monthly allowance for the entire life that is exempted from tax?.

If the member accumulatively meets the following terms:

• The age of the member is 60 or above.
• The member receives a monthly allowance that exceeds the amount of the minimal allowance according to the instructions of the law (NIS 4,405 as of the year 2017).
• The funds were deposited in the account after the year 2012.
• The signing of the member on a statement in regards to the funds that were deposited by him in the provident funds and his meeting the deposit ceilings according to the instructions of the tax authority.

The advantages of the savings in the provident fund according to amendment 190.

The personally adjusted courses of investment:

• You can choose amongst a variety of courses of investment according to the client’s needs.
• You can transfer between the courses of investment without any limitations.
• The transfer between the courses of investment is without any cost, and it isn’t considered a tax event.

Tax Benefits

• Postponing the payment of the capital gain tax to the date of the withdrawal.
• Paying a capital gain tax of 15% only on the nominal profit, instead of a real tax of 25% on the investment in securities.
• A full exemption from taxes on a capital withdrawal in the case of a death until the age of 75.
• In the case of a death at the age of above 75, then the capital withdrawal will be taxed when the only deduction is a nominal tax on capital gain of 15%.

The Advantages of the Investment

• Saving in the costs that accompany the investment, in the trade commissions and in the holding of the account.
• A wide disbursement of the investment and the advantages of the investment as an institutional investor, investing in commercial assets in the stock exchange and in assets that are not commercial (transactions outside of the stock exchange), participating in IPOs to financial institutions, exposure to securities both in Israel and abroad, including the possibility of comparing yields via the website of the ministry of finance “Gemel-Net”.

Beneficiaries

• A trans-generation transfer to beneficiaries while easing on the bureaucracy.
• The possibility that also the beneficiaries will be fully exempted from taxes under certain circumstances.

Questions that are required before choosing to deposit in provident funds according to amendment 190 or in another alternative product:

• Are the funds intended for an annuity withdrawal or a capital withdrawal?.
• Do you need to often/moderately withdraw finds?
• Do you need a loan on the expense of the funds?
• What is the importance of the location of the funds (a bank/insurance company/investment house)?
• Is it important if it a singular account owner or more?
• Is it needed and important that you have immediate transparency as to the situation of the account?
• What is the importance of a quick liquidity of the funds at a time of need?