What is the Study Fund (Keren Hishtalmut) in Israel?

The Study Fund (Keren Hishtalmut) is a popular, tax-advantaged savings plan in Israel designed to support continuing education and professional development. While originally intended as an educational fund, it is now widely used by employees and self-employed individuals as a medium-term investment and savings vehicle.

Although not legally mandatory, offering a Study Fund has become a standard and expected benefit in many industries, especially among skilled professionals.

Who is Eligible?

All employees in Israel may be offered participation in a Study Fund as part of their benefits package. While optional, it is considered a customary and valued component of employee compensation in the Israeli job market.

How Are Contributions Structured?

Contributions to the Study Fund are made by both the employer and employee, with a combined total of up to 10% of the employee’s gross salary:

Party	Contribution (%)	Notes
Employer	Up to 7.5% of gross salary	Tax-free up to the legal salary cap
Employee	Up to 2.5% of gross salary	Deducted from net salary
Total	Up to 10%	Paid into the Study Fund account

What Are the Tax Benefits?

The monthly salary cap for tax benefits is 15,712 NIS (as of 2024).
Employer contributions within this cap are exempt from income tax.
Investment growth within the fund is tax-free.
Withdrawals made after 6 years are fully tax-exempt.
Early withdrawals after 3 years are allowed for education expenses without penalty.

Contributions Above the Tax Cap

Employers may elect to calculate contributions based on the employee’s full salary, even if it exceeds the cap. While this increases savings, only contributions up to the cap receive tax advantages. Contributions above the cap are taxable for the employer and do not enjoy tax benefits for the employee.

Example:

Monthly salary: 30,000 NIS
Employer contributes 7.5% = 2,250 NIS
Employee contributes 2.5% = 750 NIS
Total contribution: 3,000 NIS/month
Tax benefits apply only to contributions based on the first 15,712 NIS.

Withdrawal Rules

After 6 years: Full tax-free withdrawal of funds.
After 3 years: Early withdrawal permitted for education expenses.
Withdrawals before these periods for other reasons may result in loss of tax benefits.

Why Offer a Study Fund?

Enhances your overall employee compensation package.
Provides a tax-efficient way to save and invest.
Allows investment growth without taxation on returns.
Funds are accessible after 6 years with no penalties.
Helps attract and retain skilled employees.

How Does Horizons Support Study Fund Contributions?

Horizons facilitates Study Fund contributions for employees in Israel with two options:

Contributions based on the tax-benefit salary cap (15,712 NIS/month).
Contributions based on the employee’s full salary (with tax benefits applying only to the capped portion).

Contributions are seamlessly transferred to an approved Study Fund provider as part of the monthly payroll process.

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Israel