In Israel, residents pay a progressive income tax. National insurance acts as social security, and the government provides public health insurance. All insurance payments are made by your employer to the insurance agencies.
All residents pay taxes on any income earned in Israel. A graduated income tax determines the percentage the government takes away from your income. In the lowest tax bracket, 10% of your income goes to the state. In the highest bracket, about 45% of your income goes to the state.
Employers are responsible for deducting the appropriate amount of income for taxation, which they send to the Tax Authority on the 15th every month. Self-employed residents file income taxes to the Tax Authority monthly. The Israeli tax schedule follows the Gregorian calendar, not the Jewish one.
New Jewish immigrants to Israel (olim) can receive almost 100% reduction in income taxes for the first 18 months in Israel. For the next 42 months, immigrants continue to receive smaller tax reductions.
Residents are required to contribute to national insurance (bitauch leumi), which is run by the National Insurance Institute. This acts as Israel's social security system. Your employer deducts 5% of your income and pays it to national insurance. If you are self-employed, you must make payments to the National Insurance Institute.
The insurance includes pensions, unemployment payments, maternity supplements and disability payments. Employers take care of sick pay.
Pensions: In Israel, the pension ages for men and women are 67 and 64, respectively. Israelis are entitled to a minimum monthly pension of 1350 shekels. If you move abroad, you may receive payments for six months after leaving Israel. For longer stays abroad, you must contact the National Insurance Institute.
Unemployment benefits: Daily compensation for unemployment is about 300 shekels (2010). Your age and number of dependants determines the length of time you may receive these payments. If you need to leave Israel for more than a few days, you will not be entitled to unemployment benefits.
Disability: You may receive disability insurance if a doctor says that you have a disability which affects your work. Your disability payments are determined by the severity of your disability. In some cases, the insurance will cover up to 75% of your salary. If you move abroad, you may receive insurance payments for six months after leaving Israel.
Maternity leave: Mothers are entitled to two months of paid maternity leave, provided they paid insurance premiums prior to their maternity. Fathers may also have a shorter paid paternity leave.
Israel's National Insurance Institute has more details on national insurance and how to access payments.
Your employer deducts an additional 5% of your income for mandatory health insurance. If you buy private insurance, you will pay your insurance company for coverage. For more information on what health type of health insurance is available, see our guide to healthcare in Israel.