Israel's Treasury Approves Higher Tax Breaks on Cheap Personal Imports

Finance Minister signs order raising the limit on personal imports free of import taxes to $75 - up from $50, and an order abolishing customs duty on packages worth between $75 and $325.

The Finance Ministry on Monday ushered in a new era of competition to Israeli retailers. Private citizens will be able to buy low-cost products from abroad tax-free over the Internet.

One stipulation is that the products are for the importer's personal use, with the exception of tobacco and alcoholic beverages.

Imported products can be liable for three types of tax - customs, sales tax and value-added tax. Finance Minister Yuval Steinitz on Monday signed two orders, the first raising the limit on personal imports free of import taxes to $75 - up from $50.

Steinitz's second order abolishes customs duty on packages worth between $75 and $325. However, he left - sales tax and VAT of 16% on such packages unchanged, when these taxes apply at all.

Until now products such as toys, furniture, household appliances, disks and so on had been liable for customs duty, if the value of the package was greater than $50.

But import taxes will remain in force if the value of the package exceeds $325.

People could always import items such as vitamins, laptops, musical instruments and books free of tax other than VAT: this remains unchanged, except in the case of an order worth less than $75. In that case no tax will be owed.

The values are for a single package of goods bought from abroad over the Internet.

The reform was spurred by the Trajtenberg Committee, which was convened by government to discuss the cost of living and how to lower it following social-justice protests last summer.

The committee, headed by economic adviser Manuel Trajtenberg, had recommended abolishing sales tax and customs on personally imported items over the Internet, up to $300 (leaving the VAT intact). That suggestion has morphed into the total tax holiday on packages up to $75, and partial break on packages up to $325.

However, sources at the Israel Tax Authority point out that the government has also approved recommendations to lower sales tax in competitive sectors, such as home entertainment systems and cell phones, from 2013.

The Tax Authority estimates the loss of income to the state from the tax breaks at NIS 60 million a year.

Q&A: How can I order from abroad tax-free?

Any product costing less than $74.99 - according to its receipt, not a statement - will be completely free of tax.

I bought an Xbox game console for $58 and shipping cost $20. Will I pay tax in Israel?

Yes. In calculating the tax, the authorities relate to the price of the product, plus shipping. In this example, the total cost is more than $74.99 and tax will be owed.

What is the customs break on packages up to $325?

If the value of the package is less than $325, you won't pay customs duty. But any other applicable taxes will be owed.

There were news reports that 700 imported products are now free of customs tax. Is that true?

Some confusion has arisen because, in parallel with discussions on lowering tax on personally imported products, Steinitz declared a customs break for import companies. That customs break relates to products for which there is no competition from Israeli companies, and the importers are supposed to roll the break onto consumers. The new rules are completely different - they relate to personal imports by private citizens over the Internet.

Where can I find an orderly list of products and applicable tax?

In Hebrew, on the Tax Authority website, under the tag "meches" (customs ). Under that is a link "shiurei mas merukazim" (list of tax rates ), which leads to a table. That shows the applicable tax by category. The relevant column for private citizens is "Misim clali" (general tax). As of Monday, the table had not been updated.