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11 October 2013

Taxation of employment income - part 3 - the tlush and 106

Most people look forward to receiving their monthly payslip, known as a תלוש משכורת or just tlush.

The Israeli tlush is a highly complicated piece of paper containing a huge amount of information. Below I will set out some of the information that you should expect to see, and what it means to you.

A good translation of a typical tlush can be found here.

The main section of the tlush sets out the various components of your gross salary. This will include - amongst other things - basic salary, bonuses, travel and/or car allowance, convalescence (דמי הבראה), overtime pay etc. All of these will be actual payments.
 
There could also appear taxable benefits that the employer has provided to the employee. No extra money is actually paid, but it adds to the taxable salary. Common examples include a company cellphone or car. The consequence of course is that more taxes are paid, and less comes home.
 
Some people may have agreed to some elements being paid net, i.e. They get a certain amount of take-home pay after deductions and taxes. The extra amount added to the salary in order to get to the correct "net" will be shown as a גילום or "gross-up."
 
The next section will deal with deductions from the salary. These fall into three broad categories:

1. Taxes - income tax and Bituach Leumi (including health tax element).
2. Funds - generally pension and Keren Hishtalmut (study) funds, where appropriate. Some tlushim will also show you how much the employer is putting aside.
3. Sundry - this could be anything agreed with the employee e.g. professional insurance, union fees, loan repayments etc.
 
There should be a summary showing the gross payments, various deductions and net salary to be paid for the month. Additionally, the number of credit points being awarded to you should be shown, as well as your marginal rate of tax (as per the tax tables or a Teum Mas) - i.e. the top rate at which income tax is being calculated.
 
The tlush should also tell you the cumulative gross earnings, taxes and fund deductions since the start of the tax year.
 
Finally, the tlush should show you details regarding your entitlement to vacation and sick pay. Typically, this will show how much your remaining entitlement was at the start of the month, the amount accruing to you for the month, how much you used during the month, and the final balance at the end of the month.

The employer is also required to give each employee an annual form (known as Form 106) summarising their salary throughout the previous tax year. This should of course agree to the December tlush (or final tlush received from an employment) cumulative. By law, the employer should provide the form 106 by 31 March following the year. Practically, you'll need to ask for it.
 
The 106 sets out the various amounts required for the tax return, and provides the tax-return codes that each number relates to. It is important to file the 106 with your tax return, and not the December tlush.

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