A study fund, known in Hebrew as "keren hishtalmut," is a medium to long-term savings product. While originally intended for professional development, these funds can now be used for general savings without a specific purpose. Unlike mandatory pension contributions from employers, contributions to study funds are not obligatory.
The maximum allowable deposit is 5% of the salary from employees and 7.5% from employers. Self-employed individuals can contribute up to 4.5% of their income to a study fund, which is considered a recognized expense. Moreover, they can choose between depositing lump sums periodically or making monthly contributions.
Employees are exempt from income tax on their employers' contributions to the fund. After six years, the accumulated amount can be withdrawn tax-free up to a certain ceiling. Additionally, account holders can obtain loans from the fund manager, usually on preferential terms. Savers can choose the fund's investment policy, modify it, and switch between managers. They can also negotiate the management fees.
According to the Treasury's current budget proposal (if approved), profits accumulated after six years will be subject to capital gains tax, similar to other financial assets. This tax will only be collected when money is withdrawn from the study fund. Consequently, profits accrued until the beginning of 2025 will continue to enjoy tax exemption.
Withdrawals at present will continue to be tax-exempt. The tax exemption on employee and employer contributions will also continue. It's advisable to consider withdrawals carefully, seek advice, and avoid hasty decisions.
