Tax Refund for Donations

One of the laws aimed at encouraging donations to community institutions is the law which entitles a donor to a tax refund for any contributions made, which can be obtained by filing a tax return.

Section 46 of the income tax ordinance establishes that an individual who donates to one or a number of community institutions is entitled to a tax credit for the same tax year. Generally, these donations are done on a private basis rather than through the pay check, and therefore, this creates an entitlement to a tax refund.

A person who donates money to a charitable institution could be credited for up to 35% of the donation amount, per certain conditions.

For example: If you’ve donated ₪1,000, you will be entitled to ₪350 credit against your tax obligation.

This law is primarily aimed at encouraging the public to donate significant amounts to charitable institutions, and in order for the donor to receive tax refunds for these donations, they must donate more than the specific threshold determined by the law, an amount which is subject to change. Section 46 of the income tax ordinance establishes that an individual who donates at least ₪190 to one or more community institutions cumulatively over the course of the year is entitled to an income tax credit for that year.

Conditions for receiving a tax refund due to donations

In order to receive this entitlement, you must meet the conditions and definitions established by
the law:

• Contribution must be a donation and not a payment in return for receiving something
  from the institution.
• The word “donation” must be printed on the receipt.
• The institution has received authorization to recognize donations for tax purposes
  according to Section 46 of the income tax ordinance.
• The amount of the donation is not greater than the threshold of 30% of the tax-eligible
  income – an amount over this threshold may be credited over the following three tax
  years.

You must submit original or digitally-signed receipts.

The receipt must state that the institution is authorized according to Section 46 of the income tax ordinance.

You can find out whether a particular institution has receive authorization according to Section 46 and is recognized for donation purposes on the Israel Tax Authority website – a search there will display details of the public institution and the authorization validity (for which year it is valid).

We recommend consulting with a professional as to whether the donation does indeed meet all the definitions according to the law and to seek assistance in submitting the request for a tax refund, whether for donations or retroactive donations.

If, at any time in the past six years, you have made a financial donation to a recognized community institution, it is reasonable to assume that you are entitled to a tax refund.