Company Car Tax Benefits: Is it Worth it for Employees in Israel?

2024-04-08 09:00:00

In many workplaces, employees are given the right to choose to have a car, and there are those who see a company car as a status symbol that indicates status in the workplace. It’s very fun to enter a gas station without paying at all, especially at a time when gas prices are on the rise. As of 2010, the use value of a company vehicle from which the tax is derived from your payslip is 2.48% of the current vehicle price according to the price list.

For example, if the value of the car you received from the workplace is estimated at NIS 140,000, then 2.48% of it is NIS 3,472. Assuming that your gross salary is NIS 15,000, then with the addition of the vehicle’s tax value (NIS 3,472) you will be charged taxes based on a salary of NIS 18,472 – an increase of approximately NIS 1,550 in tax. This is the amount from which you have to derive your viability, each of course according to his salary, tax levels and tax benefits if he is eligible.

Is it really worth it?
On the face of it, and given the example we presented of a cost of about NIS 1,550 per month, it is possible that this is a good deal for most people. why? You have to remember that when you get a car from work, you actually not only get free gas, but also enjoy an exemption from the cost of the insurance (which alone can reach about 7,000 per year on average), an exemption from paying for garage treatments, enjoy 24/7 towing services and the replacement of the car every 3 years.

If you are people who enjoy income tax credit points for a variety of items (for example, living in an eligible locality or parents of small children) – you may not pay any tax on the vehicle’s use value, so it may pay off very well for you.

Still, in order for all of these to be worthwhile, and for a saving of approximately NIS 1,550 per month to be justified, you will have to use the car enough to justify it. If the nature of your life is such that you travel a lot or travel long distances, it can definitely pay off for you. In such cases, the fuel is usually completely covered by fuel at the expense of work, and you travel more at the expense of work. In addition, a vehicle that travels more also loses its value faster, and it should not be your vehicle in such a case.

On the other hand, if you already own an electric or hybrid vehicle parked at your home, you may already feel the savings in paying for fuel, and the insurance costs are also less high in vehicles of this type. However, everything ultimately starts and ends with the amount of your annual trips, how many km you travel per year. A private car travels an average of 18,000 km per year, while a company car travels an average of 28,000-30,000 km per year.

Bottom line, there are many elements here – your area of ​​residence, gross salary, number of children, driving habits, do you already own your own car and more. The calculation is individual, but there is no doubt that this is an especially profitable deal for those who should request a car from the company.

Comments to the article (2):

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• 2.

  It is worth adding to the calculation the possibility of receiving car maintenance instead of a car

  Shay 08/04/2024 12:07

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  In that case, the viability of a company car is significantly less…

  closed

• 1.

  Not accurate

  Roy 08/04/2024 12:07

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  You didn’t take into account that many places give an amount of car maintenance in the order of the tax value and at a discount and you take the car, the above amount is reduced in addition to the tax value that is added, and so it turns out that the cost of the car is double what you mentioned..

  closed