If you are receiving rents from certain assets that located outside the territory of the state of Israel, or having other passive income sourced outside Israel, and you are Israel residents, you might need to pay for that income social security in Israel.
In our reality, a lot of people receiving rents from assets (i.e local or foreign real estate income, rents on shops, offices, business rights income). It’s not an income from active participation or active income like wages and salaries. The Israel social security calls that income “other income” and the one who have that income should pay social security payments also.
The social security payments that was paid for passive income, isn’t providing any insurance rights. Thus, those payments are in affect Taxes. If you having more than one source of the kind of income, they will be united for calculating your social security payments due.
The Israeli law determine that if the taxpayer have a total source of passive income up to 28,392 ILS in a tax year, you will be exempt from social security payments. Income that receive and special treatment by the tax laws will not be calculated as passive income that should be “taxed” as social security payments.
on the other hand, any passive income that taxed in regular tax bracket, will not be exempt from Israeli social security payments.
i.e- if you can choose the tax assessment status for rents income from apartment, you should consider the social security payments since the tax rate for that passive income is 12%.
That passive income from a foreign source (outside Israel), will be attributed to the spouse that earned the higher income so the tax that can be occur is the maximum of 31%. The social security may recognize these assets as a “joint asset” so the income will be split between the couples if a special request will be file. It means that each spouse will receive the exemption of the 28,392 ILS, and yes- it’s a “double exemption” that can be save you a 3,407 ILS in a year.
*if the income divided between the spouses, while one spouse doesn’t have any source of income, he will be exempt for the whole amount of income.