Dear Clients,
The tax coordination system for 2025 is now open for use.
This announcement is particularly relevant for individuals receiving a pension who have reached retirement age.
Background
In 2025, the monthly tax exemption on the qualifying pension (“kitzba mezaka”) was supposed to increase from 52% to 67%, an additional 15% exemption.
What is a qualifying pension? How is the exemption calculated?
In simple terms, this means an extra ₪1,400 per month tax-free on your pension, beyond the existing exemption.
What Has Changed?
Due to economic conditions and legislative changes, the exemption will increase only to 57% in 2025, meaning a 5% increase instead of the expected 15%. The full increase to 67% will now happen gradually between 2026 and 2028.
While the increase is smaller than planned, it still represents an additional ₪470 per month in tax savings—an amount worth claiming.
If you do not update your tax coordination, you might miss out on this benefit.
What Does This Mean for You?
Most individuals who have previously applied for “kibua zchuyot” (a formal pension tax exemption request) are now eligible for a higher exemption.
How is the Exemption Calculated?
The exemption is calculated as a percentage of the “qualifying pension,” which is a legal threshold currently set at ₪9,430 per month.
For example, someone eligible for a 57% exemption will receive:
57% × ₪9,430 = ₪5,375 tax-free per month.
How to Claim This Benefit?
✔ If you have already applied for kibua zchuyot:
You must update your tax coordination (teum mas), and in most cases, the additional exemption will be applied automatically.
Tax coordination system link:
👉 Click here to update your tax coordination
The Israeli Tax Authority’s new online system is user-friendly and allows you to handle tax coordination independently.
Once completed, you must submit your updated tax coordination certificate to each employer and pension provider, along with Form 101.
✔ If you have reached retirement age (67 for men, 62-65 for women) but have not yet applied for kibua zchuyot:
You should contact us as soon as possible to claim the tax benefits you are entitled to.
✔ If you have not yet reached retirement age:
In most cases, this exemption does not apply to you yet.
Wait, What Is “Kibua Zchuyot”?
“Kibua zchuyot” is a special request submitted to the Israel Tax Authority to receive a significant tax exemption on your pension.
This process can be done after reaching retirement age and allows you to also claim tax benefits on pension fund withdrawals and severance pay (pitzuim).
This can save tens or even hundreds of thousands of shekels in taxes over the course of retirement. However, this benefit is not granted automatically—you must actively apply for it.
If you’re unsure whether you have applied for kibua zchuyot, contact us!
When Should You Update Your Tax Coordination?
Tax coordination (teum mas) is required if you have income from more than one source, including multiple pension providers.
As part of this process, the tax authority determines how much tax each employer/pension provider should deduct, taking into account various benefits such as:
✅ Tax credits (e.g., for children)
✅ Kibua zchuyot
✅ Disabilities and other exemptions
Final Recommendations
We strongly advise you to update your tax coordination online to maximize your benefits or contact us for assistance in handling it for you.
Here’s the link again for your convenience:
👉 Update your tax coordination
If you have any questions, feel free to contact me at 📞 054-3100998 or 📧 hai@hb-cpa.co.il—we’re happy to help.
Best regards,
Hai