Section 1(3)-(c), proposed subsection (a2); Section 1(3)-(e), the proposed definition of "taxable income"; and Section 4(c) of the Economic Efficiency Bill (Legislative Amendments to Achieve Budget Goals for the 2025 Budget Year) (Freezing Tax Updates and Surtax), 5785-2024 (Surtax on Appreciation)

The bill establishes changes regarding income tax and real estate appreciation tax. Regarding income tax: amounts set in the Income Tax Ordinance, which are automatically updated according to the Consumer Price Index, will not be updated in the years 2025, 2026, and 2027. These amounts will remain as they were on January 20, 2024. Starting from 2028, the amounts will be updated again according to the Consumer Price Index, with the index taken into account for the update being the index for the year 2027. Additionally, it is proposed to add a temporary provision stating that an individual whose taxable income from certain sources exceeds a certain amount will be liable for an additional tax at a rate of 2% on the amount exceeding the set threshold. The definition of "taxable income" for income tax purposes will be updated. The amount set in this definition will be 5,385,285 New Israeli Shekels, and the index taken into account for updating this amount will be the index published on January 15, 2027 (instead of the index published on January 15, 2013). Furthermore, what is included in taxable income will be redefined so that it does not include certain amounts related to the Income Tax Ordinance and the Real Estate Taxation Law. Regarding appreciation tax: changes are proposed to the tax amounts applicable to capital gains from the sale of real estate. The amounts set in the Real Estate Taxation (Appreciation and Acquisition) Law will be updated, such that changes will be made to the thresholds above which a higher tax rate applies, as well as to the amounts set in various paragraphs. For example, the amount of 1,465,800 New Israeli Shekels will be replaced by different amounts in some paragraphs, and other amounts such as 4,397,380 New Israeli Shekels, 6,055,070 New Israeli Shekels, and 20,183,565 New Israeli Shekels will be updated. Additionally, changes are proposed to amounts set in other paragraphs, such as 1,978,745 New Israeli Shekels, 2,347,040 New Israeli Shekels, 5,008,000 New Israeli Shekels, 2,252,000 New Israeli Shekels, 3,746,000 New Israeli Shekels, 2,428,100 New Israeli Shekels, and 607,000 New Israeli Shekels. Furthermore, it is proposed that the update of amounts in the Income Tax Ordinance and the Real Estate Taxation Law, which was supposed to take place every tax year, will not take place in the years 2025 to 2027. These amounts will remain as they were on January 20, 2024. Starting from 2028, the update will be performed according to the index of the year 2027. Commencement: The law will enter into force on January 1, 2025. The temporary provision regarding income tax (Section 121B(a1)) will apply to income generated or received from this date onwards.

Source: הצעת חוק לקריאה השנייה והשלישית