How It Works
The training fund (keren hishtalmut) is a tax-advantaged savings plan where the employee contributes 2.5% of salary and the employer contributes 7.5%. The employer's contribution is not taxable income to the employee (within limits). Investment gains inside the fund grow tax-free. After 6 years (3 for age 60+), withdrawals are completely tax-free up to an annual deposit ceiling of approximately ₪19,920.
Training Fund Details
| Parameter | Employee | Employer |
|---|---|---|
| Contribution rate | 2.5% | 7.5% |
| Tax on contributions | From gross salary | Not taxed as income |
| Tax on investment gains | Exempt | Exempt |
| Withdrawal after 6 years | Tax-free (up to ceiling) | Tax-free (up to ceiling) |
| Withdrawal before 6 years | 25% tax on gains | 25% tax on gains |
Example – Training Fund Benefit
Employee earning ₪20,000/month:
Employee deposits: ₪500/month
Employer deposits: ₪1,500/month
Total annual deposit: ₪24,000
After 6 years (assuming 7% annual return): ~₪173,000 accumulated
Of which ~₪29,000 is investment gains
Tax on withdrawal: ₪0 (tax-free after 6 years)
If the employee had invested the same amount in a regular investment account, 25% tax on the ₪29,000 gain = ₪7,250 in tax.
בסיס חוקי
- Section 9(16A) – Training fund exemption
- Income Tax Regulations – Training fund provisions
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.