What is Amendment 190?

Amendment 190 is an amendment made to the Income Tax Ordinance in 2012. One of the layers of the amendment allows a colleague to deposit funds into a provident fund, just like in the past, and enjoy a variety of tax benefits when withdrawing. Today, a provident fund according to amendment 190 is an alternative to an investment portfolio, and serves as a main investment channel for retirees who meet the conditions of the amendment (receiving a pension allowance over 4,498 NIS + a colleague over the age of 60) and enjoy only a nominal 15% capital gains tax.


Main points of amendment 190

The amendment amended several important sections of the Income Tax Ordinance, including:

  • Increasing the basket of exemptions for retirees.
  • Regulating a “budget pension” for controlling owners as a recognized expense.
  • An option for intergenerational bequeathing of funds without capital gains tax.
  • A recognized annuity payment option that is exempt from capital gains tax.
  • Deposit of funds to a provident fund by the retiree with an option to withdraw a significant portion of the fund’s funds as liquid funds.


Important highlights for the management of provident funds according to amendment 190

  • A provident fund can be opened according to amendment 190 at any time, but only a member who meets the two above conditions will be able to make a “capital” withdrawal of the recognized annuity funds.
  • It is possible to move provident funds for correction 190 between bodies, without costs and without prejudice to the member’s rights at any time.
  • You can switch between investment paths in provident funds, at no cost and without harming the insured.
  • In the inheritance, all the funds will be transferred to the heirs with full tax exemption (up to the age of 75 only).
  • The member will have the option to withdraw the funds as an annuity at any time.
  • The initial tier will be subject to marginal tax at the time of withdrawal, but on the other hand, the depositor may in certain cases be entitled to tax benefits for the deposit. This is the initial layer which constitutes the first NIS 34,452 that are deposited each tax year.


The tips of Mada experts for provident funds according to amendment 190

  • A deposit for amendment 190 is a great investment alternative for those entitled to the benefit, since they can enjoy a range of advantages, compared to managing funds in traditional investment portfolios or savings policies, which are subject to a real 25% capital gains tax, compared to a reduced capital gains tax in amendment 190, which is 15% nominal capital gains tax only.
  • With the help of investment management according to amendment 190, the tax event on capital gains can be postponed until the actual withdrawal date. Postponing a tax event allows the investor to maximize profits even on the tax component over the years, thus maximizing interest and de-interest.
  • With the help of an investment through Amendment 190, we will be able to define the beneficiaries in an intergenerational inheritance, in this case our beneficiaries will also benefit from tax benefits.
  • One of the main advantages of investing in Amendment 190 is the investor’s option to be exposed to investing through a provident fund. Because the Provident Fund, unlike other products in the capital market, invests part of its funds in real estate, infrastructure, value investments that are not tradable, and more. Investments of this type will be an anchor for the fund during declines in the capital market.
  • We recommend setting up a power of attorney to perform operations at the cash register, in case the cash register owner ceases to function/enters a state of mental exhaustion.


The advanced services provided by Mada regarding the 190 amendment, financial planning and investments

  • Examining an investment in a provident fund according to amendment 190.
  • Pension planning for intergenerational inheritance through provident funds.
  • Investment in alternative / tradable assets through provident funds.
  • “Budget pension” for controlling owners.