What Counts as a Taxable Benefit?
In Israel, any benefit provided by an employer to an employee – beyond base salary – is generally considered taxable income unless specifically exempt. The benefit is valued at its market value and added to the employee's gross income for tax and National Insurance purposes. Common taxable benefits include: company cars, mobile phones for personal use, meals, health insurance premiums, and housing.
Common Employee Benefits and Tax Treatment
| Benefit | Taxable? | Value Basis | Notes |
|---|---|---|---|
| Company car | Yes | ~2.48% of list price/month | Reduced rate for EVs |
| Mobile phone | Yes | ~105 NIS/month | Fixed imputed value |
| Meals/food vouchers | Partially | Amount above exempt threshold | Small amounts may be exempt |
| Health insurance | Yes | Full premium amount | Added to gross income |
| Stock options (Section 102) | Deferred | At exercise or sale | 25% capital gains route |
| Training fund (up to ceiling) | No | Employer 7.5% | Exempt within limits |
| Pension contributions (within limits) | No | Employer 7.5% + 8.33% | Exempt within limits |
| Annual gift (up to ₪230) | No | Per event | Exempt up to threshold |
Example – Total Compensation Tax Impact
Employee receives: Monthly salary ₪25,000, company car (list price ₪200,000), mobile phone, employer health insurance (₪500/month).
Taxable additions:
Car benefit: ₪200,000 × 2.48% = ₪4,960/month
Phone: ₪105/month
Health insurance: ₪500/month
Total taxable income: ₪25,000 + ₪4,960 + ₪105 + ₪500 = ₪30,565/month
The employee pays tax and NI on ₪30,565, not ₪25,000. At 35% marginal rate, the benefit additions cost ~₪1,948/month in extra tax.
Tax-Free Benefits (Within Limits)
- Pension contributions up to 7.5% employer share
- Training fund contributions up to 7.5%
- Severance fund contributions up to 8.33%
- Gifts up to ₪230 per event (holiday, birthday)
- Refreshments in the office
- Work tools and equipment used exclusively for work
בסיס חוקי
- Section 2(2) – Income Tax Ordinance (Employment income)
- Income Tax Regulations – Benefit-in-kind valuation
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.