The Knesset approved in first reading the draft law Eli Cohen («Kulan»), providing for the introduction of compulsory pension insurance for individual entrepreneurs.
The law was supported by all present in the hall for voting by the deputies (41 persons).
The bill has been agreed with the Association of individual entrepreneurs LAHAV and the chamber of tax consultants.
The law would apply to entrepreneurs with incomes above 50% of the average wage in the country. The entrepreneur will be obliged to make deductions in the amount of from 2% to 10% of their income not exceeding the average salary in the country. Deductions from income in excess of the average wage in the country will be on a voluntary basis.
During the first two years of the date of the opening of business the entrepreneur will be exempted from the obligation to make pension contributions. Also from mandatory contributions will be exempt individual entrepreneurs under the age of 21 years, entrepreneurs who have attained the minimum age of retirement, and the entrepreneurs who have reached the age of 55 years at the time of entry of this law into force.
In case of violation of the law, when calculating taxes, the individual entrepreneur will not be considered costs in the amount not made pension contributions, multiplied by two.
In addition, the Ministry of economy will appoint special inspectors who will have powers to require pension statements from individual entrepreneurs and from the pension funds and foundations.
When fully closed, business entrepreneur, making a deduction in excess of the statutory minimum, will have the right to take from the pension Fund up to one third of the accumulated surplus of the difference between his pension contributions and the legislative minimum of the sum as «compensation for dismissal».
The law on mandatory pension insurance, adopted in 2007 and came into effect since 2008, applies only to employees. Individual entrepreneurs constituting 12% of the workforce in Israel, can make deductions on their own. In this case, unlike the employee, for which two thirds of the contributions the employer, the individual entrepreneur is forced all allocations to do it yourself. Due to the lack of any incentive benefits pension contributions make up only about 50% of the individual entrepreneurs.
According to the law, depending on salary, the entrepreneur will be obliged to make deductions in the amount of from 2% to 10% of their income not exceeding the average salary in the country. Deductions from income in excess of the average wage in the country will be on a voluntary basis.
During the first two years of the date of the opening of business the entrepreneur will be exempted from the obligation to make pension contributions.
At the moment it is not clear how the government intends to supervise observance of the law, and what sanctions will be imposed for its violation.
We will remind that last week the editors NEWSru.co.il asked our readers to ask questions on the issues of small and medium businesses in Israel Boris Schindler member of the Board of Directors and the head of the Russian headquarters of the «Movement for protection of rights of entrepreneurs».
On the issue of pension insurance for individual entrepreneurs, he replied: «the Problem of pension provision is extremely acute and complicated. Recently in the Knesset, submitted the draft law, in which private entrepreneurs want to oblige to save money for retirement over and above what they pay in «Leumi». This bill is currently under discussion and objection on the part of some entrepreneurs who prefer to do the pension accumulations not out of obligation, but by desire as it is today. Our movement will not allow the government to carry out unilateral steps that would prejudice private entrepreneurs. In the case of the bill on mandatory pension insurance we require you to provide them with the same tax benefits that receive wage earners, so the government actually encouraged us to do retirement savings and not forced. The main problem in this area is that the state provides to employees who delay retirement, more tax benefits than private entrepreneurs, and thereby encourages the latter to make savings. Entrepreneur in virtue of his position should take care of future pension, to pay fees and save money for pension savings. While contributions to pension program for employees at the request of the state do their employers. This is caused by the desire of the state to protect employees (because if the employer will not transfer the money into their pension funds, the profit will be higher), unlike private entrepreneurs, who themselves are employers. In addition, a certain proportion of the tax that the owners pay into the national insurance Institute is in the pension, so they too will be eligible to receive old age benefits upon reaching retirement age».