Do kibbutzim pay taxes?

Main topic: Humanities

Other topics: Israel

Short answer:

Yes. Kibbutzim pay taxes.

Traditional Kibbutzim pay taxes as a collective. Members of privatized Kibbutzim have paid taxes on individual incomes in Israel since 2017.

Kibbutzim (Plural for Kibbutz) are collectives in Israel that provide self-sufficient socialistic community living based on the principles of Zionism. First Kibbutz was established in 1910.

In a traditional Kibbutz, each member owns a portion of the wealth. After paying for living expenses and health and welfare provisions, they reinvest any remaining gains into the venture.

Over the years, their productive activities have ranged from agriculture, manufacturing, and tourism to significant industrial endeavors.

Kibbutzim have been financially successful

Some of the Kibbutzim have been exceptionally successful industrially because of constant innovation and privatization. Notably, Netafim Kibbutz is known for pioneering drip irrigation, Sasa Kibbutz is a world leader in vehicle armor technology and manufacturing.

In 2022, there are around 273 Kibbutzim. About 220 of the Kibbutzim have been privatized as cooperative societies without socialistic ideology. In privatized Kibbutz, families live in their homes instead of a shared communal facility, and the individual members may be engaged in activities outside their Kibbutz, resulting in a high variance in personal monthly incomes.

2016 Kibbutzim tax reforms have changed the way the privatized Kibbutz pay taxes

The Israeli Income Tax Ordinance offered several exemptions to the traditional Kibbutz. Kibbutz members (called Kibbutzin) were not taxed, and the only entity that was taxed was the Kibbutz itself, whose tax burden was determined by the tax rates of its members.

In December 2016, a Knesset committee approved the tax reform after negotiations with privatized Kibbutzim. The tax reforms aimed to increase tax collection significantly. Under the proposed reform, privatized Kibbutzim members started paying individual income taxes from 1 January 2017 instead of collective Kibbutz income. They have also started contributing to the Israeli social security system beginning from 1 July 2017.

The traditional Kibbutzim continue to pay taxes as a collective.