Tax-Free Within Limits
Employer contributions to pension (up to 7.5% of salary), severance fund (up to 8.33%), and training fund (up to 7.5%) are not taxed as income to the employee, provided they are within the prescribed limits and salary ceilings. Contributions above the limits or above the salary ceiling are taxed as a benefit-in-kind.
Salary Ceiling
The tax exemption on employer contributions applies up to a salary ceiling (approximately ₪44,000/month for 2026). Contributions calculated on salary above this ceiling are taxable to the employee. This primarily affects high-earning executives.
Example
Executive earning ₪60,000/month. Salary ceiling: ₪44,000.
Employer pension (7.5%) on full salary: ₪4,500
Tax-free portion (on ₪44,000): ₪3,300
Taxable portion: ₪1,200/month → added to gross income
At 50% rate: additional tax of ₪600/month
בסיס חוקי
- Section 3(e) – Taxable employer contributions
- Income Tax Regulations – Contribution ceilings
Important Note: The information on this website is for general informational purposes only and does not constitute professional tax advice. Consult a qualified tax advisor before making financial decisions.