Donation

its meaning in Section 9(2) determined for this purpose by the Minister of Finance with the approval of the Knesset Finance Committee, 35% of the donation sum will be credited from the tax that he liable to pay in that year, only if no tax credit will be given in that certain tax year for a total sum of donations exceeding 30% of the tax-payer’s taxable income in that year or 2,000,000 new Shekels, the lower of the two.”

A sum exceeding the crediting ceiling donated in that tax year, will be credited from tax according to the instructions of this section in the next three consecutive tax years, only if no credit is given in each of the three tax years, as aforesaid, due to a total sum of donations exceeding the credit ceiling.”

Following is the amounts adjustment dated January 1 2006 :
The minimal sum for the total of donations granting crediting: 370 NIS a year.
The maximal sum granting crediting: 2,165,000 NIS a year. In any case, the tax crediting will not exceed 30% of the taxable income.

RULES FOR TAX CREDITING DUE TO DONATIONS TO PUBLIC INSTITUTES

Special Approval for Public Institutes

The tax crediting is granted due to donations to public institutes having a special approval according to Section 46 of the ordinance alone. It should be noted that most of the approvals have a limited validity – crediting due to institute will not be permitted, when the validity of the approval was not renewed [an approval validity is not extended, among other things, due to failure to present reports, faulty accounting, etc.].

The list of institutes having an approval concerning donations appears in the Ministry of Finance web-site (www.mof.gov.il/itc).
Conditions for granting tax crediting

Any donor fulfilling the conditions is eligible for the benefit – whether it is a private individual, a business or a company.

In order to obtain the tax crediting due to donation – the donation has to pass the following few tests:
Presenting an original receipt for the donation. If there is no original receipt enclosed, no tax crediting will be grated, unless a partnership or “house property” company donation is involved, according to Section 64 of the Ordinance, where each of the partners is entitled to his relative share in the donation. (It is impossible to present an auditor’s opinion, as accepted in the matter of approvals for tax deducted at source.)
The institute is an institute approved for donation tax crediting. The test is, if, at the time of the donation, the institute was approved, and not later.
Anonymous donations will not be permitted for tax crediting, except: If the donation sum is lower than 400 NIS, and if the donation sum is pre-printed on the receipt.
The receipt carries the name of the taxpayer, his/her spouse or child up to 18 years of age.
The institute data is printed, as required, on the receipt. These data include: Name, corporation number, etc., as well as details of the payment (Check, cash, standing order, etc.). The income tax accounting instructions oblige a public institute to print in the receipt the word “donation” and the following sentence: “The institute has an income tax approval regarding donations according to Section 46 of the Income Tax Ordinance.” If the receipt does not include all of the above, it is incompatible with the income tax instructions, and therefore no tax crediting will be given because of it.
Donations given in installments (standing order, postdated checks and credit cards) – the tax crediting will be given only on the sums repaid during the specific tax year. For the remainder – tax crediting will be given in the following tax year.
If the something was given in exchange for the donation, no tax crediting due to the donation will be permitted. This means those cases where a certain service was acquired from the public institute that received the donation (old-age homes, schools, yeshivoth, sports classes, etc.). If a partial return was given for the donation (e.g., in a lottery or a public auction), a tax crediting will be given in the sum of the difference between the sum actually paid and the value of the return received. If the return value is lower than 200 NIS, and if it is negligible in relation to the sum paid as a donation – the entire payment will be considered a donation.
A donation as payment for a raffle ticket will be permitted for tax crediting only if the value of the prize expected in that raffle is symbolic. If the value of the prize expected in that raffle is considerable (a car, electric appliances, etc.), then there is a return for the payment for the raffle ticket, and therefore no tax crediting will be permitted here.
Money equivalent donations – It is determined that giving services voluntarily will not be permitted for tax crediting. Giving a business stock as a donation will be taxed similar to a regular sale, and the taxable sum will be permitted for tax crediting as a donation against a receipt from the public institute. If the donation involves donation of property (art objects, land, computers, etc.) – the value of the donation will be determined by an estimator’s assessment, and the assessment will be attached to the receipt.

Receiving the crediting

An individual and businesses not incorporated as a limited company: Tax crediting at the rate of 35% of the donation amount will be given. For example, if 100 NIS were donated, the donation will cause a reduction of 35 NIS in the sum that the taxpayer must pay for Income Tax in that year.

Limited companies: The crediting is according to the company tax rate. For example: If 100 NIS were donated in 2006, the donation will cause a reduction of 31 NIS in the tax sum in that year.

The tax crediting permission can be done in three possible ways:

Course A
Submitting an annual report to the Income Tax Authorities. This course is suitable to all taxpayers, even taxpayers who are not obliged to  submit a report.

Course B
Making a tax adjustment by salaried workers during the  tax year.

Salaried workers wishing to make tax adjustments due to donations during the tax year (also within the framework of making additional tax adjustments), will refer to the income tax assessor, with Form 116: “Application for easement and tax calculation adjustment by the income tax assessor.”

The application will be reviewed in the same manner as all applications are reviewed. The application will be tested by a further examination: Donation reasonability in relation to the income will be examined as well (if the donation sum is not reasonable, no tax crediting will be given promptly).

Within this framework, no approval will be given to donations in post-dated installments that were not made to date, or to money equivalent donations.

Course C
Receipt of tax crediting directly by the employer. (Possible only for specific employers who received a special permit from the Income Tax Commission).

In this case, it should be verified that the institutes receiving money donations have a permit according to Section 46 of the Ordinance; also, it should be verified that with donations in large sums for institutes that in essence are service givers (old-age homes, theatres, sports classes, etc.), the donor enclose a declaration that he did not receive in return for his donation the following: any service, or any privilege, or any benefit whatsoever.

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