Filling in tax returns is never a pleasure, but when it comes to annual deadlines, Israel is relatively civilized. There is no mad rush to file by April 15, unlike the situation in the United States, for example.
On May 15, 2015, the Israeli Tax Authority (ITA) announced extended deadlines for
the 2014 annual tax return (Operating Instructions 5/2015) regarding the 2014 annual tax return.
When is the filing deadline?
According to the announcement, for individuals, the statutory deadline for the 2014 annual tax return was extended by one month to: June 30, 2015 for online filers and May 31, 2015 for other individuals. For companies, in principle the statutory deadline is May 31, 2015.
Additional time extensions for filing can be requested from the ITA if you have a good reason.
Alternatively, most accounting firms are allowed to spread out the filing of their clients’ tax returns over a longer period, without providing reasons, according to a special arrangement between the ITA and the Institute of Certified Public Accountants in Israel. This special arrangement was re-confirmed by the May 15 announcement from the ITA.
Special Arrangement for Accountants filing Online
Under the special arrangement, accountants can generally spread the filing of 2014 online tax returns of individuals (not directors or major shareholders) as follows:
- 15% by June 30, 2015
- 35% by August 31, 2015
- 100% by November 30, 2015.
And accountants can generally spread the filing of 2014 online tax returns of companies and their directors and major shareholders, as follows:
- 20% by July 30, 2015
- 50% by November 30, 2015
- 100% by February 29, 2016.
Paper returns must also be filed with the relevant local tax office. The accountant must meet all these deadlines to stay within the special arrangement – he can’t catch up at a later stage. If the accountant misses a deadline or is not listed at the ITA as representing the taxpayer, filing extensions can be requested on a case by case basis.
The ITA encourages accountants to use the online system for professionals – called “Shaam” – rather than the main ITA website. The “Shaam” system works quicker, checks more things for accuracy, and is more secure as accountants are issued special identity cards. And tax refund claims of up to NIS 10,000 via Shaam may be processed sooner…
Less lenient special arrangement for offline returns, charities and “family companies”
For those accountants that do not file online 2014 tax returns on behalf of their clients, the special arrangement prescribes less lenient deadlines for such paper filings, if they are permitted at all. This also applies to Charities and flow-through “family companies” acccording to Section 64A of the Income Tax Ordinance.
The deadlines for such individuals are:
- 30% by June 30, 2015,
- 60% by July 30, 2015, and
- 100% by August 31, 2015.
The deadlines for such companies are:
- 25% by July 30, 2015,
- 60% by November 31, 2015,
- 100% by January 31, 2016.
Who must file a tax return?
There are detailed rules about who must file an annual Israeli tax return. But exemptions from doing so may apply to employees and investors if the income was fully taxed at source and other conditions are met, as well as Olim regarding overseas income and gains in their ten year tax holiday. An annual tax return is required in most other cases. If in doubt, check with an Israeli accountant.
Online and paper filings are required from you if you must file a tax return and you have income from a business, profession or employment.
However, no online filing is needed in the following cases: (1) if you and your spouse have reached retirement age (generally 67 for men, 64 for women), or (2) if your income from a business, employment and agriculture didn’t exceed NIS 81,250 nor did your spouse’s income exceed that amount, nor did your joint income NIS 162,490. Nevertheless, an online return is required if you are a 10%-or-more shareholder in a company, or if you claimed “negative income tax” benefit.
Any delay in filing an online return when required can be costly – there are penalties of NIS 1,180 per month and any paper return filed will be ignored by the ITA. Other penalties apply to paper returns not filed when required.
However, there is currently a bug in the ITA online system for taxpayers who don’t have an Israeli identity card (Teudat Zehut). The system will only accept Israeli I/D numbers, not passport numbers. In such a case, it may be advisable include an online rejection notice when filing the paper return.
Which Companies Are Excluded?
The special arrangement for accountants does NOT apply to the following delinquent taxpayers who:
- Failed to file a required return in either of the previous two tax years;
- Didn’t yet pay an administrative penalty;
- Face criminal proceedings;
- Are blocked by the tax office due to other deficiencies.
Companies in liquidation are also excluded from the special arrangement.
Dormant companies that meet various dormancy criteria will not be taken into account in the above percentage counts. Tax form 2550 must be filed requesting de-registration.
In the case of capital declarations (Hatsarot Hon) as of December 31, 2014, the deadline is the later of the statutory deadline (120 days) or the date fixed for filing the annual tax return, unless the Assessing Officer decides otherwise.
Monthly Deadlines For Businesses
The above refers to annual tax return deadlines. Unfortunately, for businesses in Israel, there is little flexibility regarding the monthly or bimonthly deadlines for income tax, VAT and national insurance – usually due by the 15th. Delays can lead to penalties and even a denial of permission to do business with public bodies and public companies.
To Sum Up:
It doesn’t pay to be a laggard….
As always, consult experienced tax advisors in each country at an early stage in specific cases.
The writer is a certified public accountant and tax specialist at Harris Consulting & Tax Ltd.