il-employee-tax-refund

Israel Employee Tax Refund Skill v1.0

Based on work by Skills IL, licensed under MIT. Adapted for the OpenAccountants format.

Section 1 — Quick reference

Quick reference table

Field	Value
Country	Israel (מדינת ישראל)
Scope	Voluntary tax refund claims for salaried employees
Currency	NIS (Israeli New Shekel — ₪)
Primary form	Form 135 (דוח שנתי מקוצר) or online refund portal
Key document	Form 106 (אישור שנתי על משכורת ומס שנוכה) from employer
Refund window	6 years from end of tax year (Section 160, Income Tax Ordinance)
Online portal	https://secapp.taxes.gov.il
Credit point value (2026)	NIS 2,904/year (NIS 242/month) — frozen 2025–2027
Tax authority	Israel Tax Authority (ITA — רשות המיסים)
Contributor	Open Accountants Community
Validated by	Pending — requires sign-off by Israel-licensed רואה חשבון or יועץ מס

Conservative defaults

Conservative defaults table

Ambiguity	Default
Unknown credit point eligibility	Apply base resident points only
Unknown whether tax coordination (Tium Mas) was filed	Assume it was not filed — calculate refund accordingly
Unknown donation institution approval	Verify before claiming Section 46 credit
Unknown Yishuv Mezakeh eligibility	Verify against annual ITA locality list

Section 2 — Refund window

• Refund window rule — The retroactive refund window is 6 calendar years from the end of the tax year, per Section 160 of the Income Tax Ordinance (Section 160, Income Tax Ordinance)

Refund window deadlines table

Tax year	Last day to claim refund
2020	31.12.2026
2021	31.12.2027
2022	31.12.2028
2023	31.12.2029
2024	31.12.2030
2025	31.12.2031

Years older than 2020 can no longer be claimed in 2026.

Section 3 — Reading Form 106

• Form 106 — Form 106 (אישור שנתי על משכורת ומס שנוכה) is the annual income summary issued by the employer by March 31 of the following year.

Key fields

Key fields table

Field	Hebrew label	What it tells you
042	סה"כ מס שנוכה במקור	Total income tax withheld by this employer
158 / 172	משכורת חייבת	Taxable salary — base for tax-due calculation
218 / 219	הפקדה לקרן השתלמות	Keren Hishtalmut deposit
Months worked	חודשי עבודה	If less than 12, partial-year work — common refund trigger

• Multiple Form 106s — If the employee has multiple Form 106s from the same tax year (job change), sum field 042 across all forms.

Bituach Leumi income-replacement payments

If the employee received BTL payments during the year, request the annual confirmation (אישור שנתי למס הכנסה) from Bituach Leumi:

BTL income-replacement payments table

BTL payment	Hebrew	Tax treatment
Maternity pay	דמי לידה	Fully taxable — add to 158/172 and 042
Unemployment pay	דמי אבטלה	Fully taxable — add to 158/172 and 042
Short-term work injury (up to 91 days)	דמי פגיעה	Fully taxable — add to 158/172 and 042
Pregnancy preservation pay	דמי שמירת היריון	Fully taxable — add to 158/172 and 042
Reserve duty pay	תגמולי מילואים	Usually inside Form 106 already; only add direct-from-BTL payments

Common pattern: The refund usually originates from the salary side, not the BTL side. BTL typically under-withholds tax, while the employer over-withholds during worked months (assuming full-year salary).

Section 4 — Refund triggers

Refund triggers table

#	Trigger	When it applies	Statutory anchor
1	Mid-year job change / multiple employers	Two or more Form 106s for the same year and no Tium Mas was filed	Section 164 ITO
2	Partial-year work / unemployment	Less than 12 months worked	Withholding over-projection
3	Maternity / paternity leave	Received דמי לידה from Bituach Leumi	Section 9(6) ITO
4	Military reserve duty (Miluim — מילואים)	30+ days of reserve service in the prior tax year	Section 39B ITO (Amendment 283)
5	Charitable donations	Total donations to Section 46-approved institutions ≥ NIS 207 (2026 minimum)	Section 46 ITO
6	Yishuv Mezakeh (ישוב מזכה)	Center of life in eligible periphery locality for 12+ months	Section 11 ITO + Negev/Galilee Law
7	New immigrant credit points	Oleh Chadash within first 54 months of Aliyah (post-2022)	Section 35 ITO + Amendment 262
8	Completed academic degree	BA: 1 point/year up to 3 years (graduates 2023+); MA: 0.5 point for 2 years	Section 40g ITO
9	Single parent / alimony	Court judgment establishing single-parent status	Sections 64, 65, 66 ITO
10	Disability exemption	100% medical disability, blindness, or 90%+ multi-organ calculation	Section 9(5) ITO
11	Self-deposit to pension beyond employer's deposit	Employee deposit to pension fund or life insurance	Sections 45A and 47 ITO
12	Early Keren Hishtalmut withdrawal	Bank withheld 47% but real marginal rate is lower	Section 9(16a) + Section 164 ITO
13	Missed child credit points	Custody changed but employer's Form 101 not updated	Section 40 ITO
14	One-time bonus / 13th salary	Monthly over-withholding on large bonus; annual reconciliation produces refund	Regulation 6 of withholding regulations

5.1 Reserve duty credit points (Section 39B, Amendment 283)

Reserve duty credit points table (Section 39B ITO, Amendment 283)

Days served in tax year	Points awarded	Annual value (NIS)
30–39	0.5	1,452
40–49	0.75	2,178
50–54	1.0	2,904
Each additional 5 days	+0.25	+726
Maximum	4.0	11,616

• Realization timing — Realized in the year AFTER the service (service in 2025 → claim on 2026 refund) (Section 39B ITO, Amendment 283)

5.2 New immigrant schedule (post-2022, Amendment 262)

New immigrant schedule table (Section 35 ITO + Amendment 262)

Period from Aliyah date	Monthly points	Annual rate
Months 1–12	1/12	1 point
Months 13–30 (18 months)	1/4	3 points
Months 31–42 (12 months)	1/6	2 points
Months 43–54 (12 months)	1/12	1 point

• Total points and pre-2022 schedule — Total: 8.5 credit points over 54 months. For Olim who arrived before 1.1.2022, the pre-Amendment 262 schedule applies (7.5 points over 42 months). (Section 35 ITO + Amendment 262)

Section 35 is for credit points only — there is no "Section 35 mortgage interest deduction for Olim." Do not promise a mortgage refund under this section.

5.3 Donation credit (Section 46)

• Minimum donation — NIS 207 (2026) (Section 46 ITO)
• Credit rate — 35% of donated amount (Section 46 ITO)
• Annual ceiling — NIS 10,354,816 or 30% of taxable income, whichever is lower (Section 46 ITO)
• Institution approval requirement — Institution must hold active Section 46 approval for the year of donation (Section 46 ITO)
• Valid receipt formats — Valid receipt formats: original, certified copy, or electronic (marked מסמך ממוחשב) (Section 46 ITO)

5.4 Yishuv Mezakeh

• Yishuv Mezakeh — Residents of eligible localities receive a percentage discount on tax due, capped at a NIS ceiling. The list of eligible localities and per-locality percentage is published annually by the ITA. Always verify against the current list for the relevant tax year.

5.5 Disability exemption (Section 9(5))

Disability exemption table (Section 9(5) ITO)

Duration	Exempt earned income ceiling (2026)
365+ days (long-term)	NIS 445,200/year
185–364 days (short-term)	NIS 81,960/year
חוק הנכים / חוק נפגעי פעולות איבה pension	NIS 684,000/year

• Qualifying conditions — Qualifying conditions: 100% medical disability, blindness, or 90%+ via multi-organ-injury calculation (ועדה רפואית determination required). (Section 9(5) ITO)

Section 6 — Estimating the refund

• Refund estimate formula — Correct tax (under brackets and credits) − Tax actually withheld (sum of field 042 across all Form 106s)

2026 income tax brackets for employees

2026 income tax brackets table

Monthly salary band (NIS)	Annual band (NIS)	Rate
Up to 7,010	Up to 84,120	10%
7,011 – 10,060	84,121 – 120,720	14%
10,061 – 19,000	120,721 – 228,000	20%
19,001 – 25,100	228,001 – 301,200	31%
25,101 – 46,690	301,201 – 560,280	35%
46,691 and above	560,281 and above	47%
Plus surtax	Above 721,560 annual	Additional 3%

For prior tax years, use the brackets that applied to that year.

Present the estimate as a range, not a single number, and note that the ITA's actual calculation may differ.

Section 7 — Document checklist by trigger

Document checklist table

Trigger	Required documents
All claims	Form 106 from every employer; Teudat Zehut (תעודת זהות) + Sipach; bank account confirmation (אישור ניהול חשבון)
Multiple employers	All Form 106s — sum field 042 across them
Partial year / unemployment	BTL annual confirmation listing months and amounts
Maternity/paternity leave	BTL דמי לידה annual confirmation
Reserve duty (Miluim)	Form 3010 (אישור על ימי מילואים) from IDF reserve unit
Section 46 donations	Signed receipts from each approved institution
Yishuv Mezakeh	אישור תושבות from local authority for each year (12+ months residence)
New immigrant	Teudat Oleh (תעודת עולה) + Aliyah date
Academic degree	Diploma + transcript (verifies completion year)
Single parent / alimony	Court judgment + bank transfer records
Disability	Medical board determination (ועדה רפואית) + ITA disability committee ratification
Pension self-deposit	Annual deposit certificate from pension/insurance provider
Keren Hishtalmut early withdrawal	תלוש משיכה showing 47% withholding

Section 8 — Submission channels

Submission channels table

Channel	When to use	Where
Online refund portal	Not obligated to file Form 1301; has digital government identity; has scanned documents	https://secapp.taxes.gov.il
Manual Form 135	Prefers paper; online portal doesn't support the case; identity verification issues	https://www.gov.il/he/service/itc135 — submit at the assigned Misrad Shuma (משרד שומה)

• Form 1301 requirement override — If the employee is required to file Form 1301 (income above surtax threshold, foreign income, capital gains), neither Form 135 nor the online portal applies. The refund computation must be integrated into Form 1301.

Section 9 — Prospective fix (Form 101)

• Form 101 update — If a refund trigger is ongoing (still a single parent, still an Oleh in credit-point window, still residing in Yishuv Mezakeh), the employee should update their Form 101 at the employer for the current and following year. Form 101 sets the credit-point basis the employer uses for withholding.

Without this fix, the employee will file the same refund every year for the same missed credit. The retrospective refund returns last year's over-withholding; updating Form 101 stops the over-withholding going forward.

Section 10 — Worked examples

Example 1 — Two jobs in 2024

Scenario: Developer worked 6 months at Employer A (NIS 25,000/month) and 6 months at Employer B (NIS 22,000/month). No mid-year Tium Mas filed.

Working:

• Field 042: NIS 24,800 withheld at A + NIS 22,400 at B = NIS 47,200 total withheld
• Aggregate annual income: NIS 282,000
• Correct annual tax (2024 brackets, 2.75 default points for female): ~NIS 43,700
• Estimated refund: NIS 3,100 – NIS 3,800
• Trigger: #1 (mid-year job change)
• Documents: both Form 106s, Teudat Zehut, bank confirmation
• Deadline: 31.12.2030

Example 2 — Reserve duty 65 days in 2025

Scenario: Teacher served 65 days of reserve duty in 2025.

Working:

• Section 39B schedule: 50 days = 1.0 point; 15 additional days (over 50) at +0.25 per 5 days = +0.75 points
• Total: 1.75 points × NIS 2,904 = NIS 5,082 expected refund for 2026
• Points are realized in the year AFTER service → claim on 2026 refund
• Document: Form 3010 from reserve unit
• Submit after 2026 Form 106 is issued (by 31.3.2027)

Example 3 — Section 46 donations for 2022

Scenario: Employee donated NIS 6,000 to three Section 46-approved nonprofits in 2022.

Working:

• Credit: NIS 6,000 × 35% = NIS 2,100
• Deadline: 31.12.2028 — still open
• Documents: signed original receipts; verify each institution's Section 46 approval was active in 2022

Section 11 — After submission

• Processing timeline — ITA must process and pay the refund within one year from the assessment date, or two years from the end of the tax year, whichever is later
• Late refund interest — Refunds paid after the statutory window accrue CPI linkage (הצמדה) plus 4% annual interest
• Document request response — If the ITA sends a "Drisha LeHashlamat Mismachim" (דרישה להשלמת מסמכים) — request for additional documents — respond within the stated deadline or the request closes

Section 12 — Reference material

Reference material table

Resource	Reference
Tax Authority Form 135	https://www.gov.il/he/service/itc135
Online refund portal	https://secapp.taxes.gov.il
Kol Zchut — tax refund overview	https://www.kolzchut.org.il/he/החזר_מס_הכנסה
Kol Zchut — credit points	https://www.kolzchut.org.il/he/נקודות_זיכוי
Kol Zchut — reserve duty points	https://www.kolzchut.org.il/he/נקודות_זיכוי_ממס_הכנסה_ללוחמי_מילואים
Kol Zchut — Section 46 donations	https://www.kolzchut.org.il/he/זיכוי_ממס_הכנסה_בשל_תרומה_(סעיף_46)
Kol Zchut — Yishuv Mezakeh	https://www.kolzchut.org.il/he/זיכוי_ממס_הכנסה_לתושבים_בפריפריה
Kol Zchut — disability exemption	https://www.kolzchut.org.il/he/פטור_ממס_הכנסה_לאנשים_עם_נכות
Kol Zchut — Form 106	https://www.kolzchut.org.il/he/טופס_106

Disclaimer

חשוב: כל המידע בקובץ זה מיועד למטרות מידע וחישוב בלבד. יש לבדוק כל עמדה מול רואה חשבון (Ro'eh Cheshbon) או יועץ מס (Yo'etz Mas) מוסמך לפני הגשה או פעולה.

This skill and its outputs are provided for informational and computational purposes only and do not constitute tax, legal, or financial advice. Open Accountants and its contributors accept no liability for any errors, omissions, or outcomes arising from the use of this skill. All outputs must be reviewed and signed off by a qualified professional — such as a רואה חשבון (Ro'eh Cheshbon — CPA) or יועץ מס (Yo'etz Mas — tax advisor) licensed in Israel — before filing or acting upon.

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