The Israel-Hamas war continues. Below is a round-up summarizing recent announcements from the Israeli Tax Authority (ITA), the National Insurance Institute (Bituach Leumi), the CPA Institute and others:

Compensation delays:

One of the complaints against the Israeli government system of war compensation concerns the delay in getting paid, at a time when sales are down and much manpower is called up. The Compensation Fund reported that by December 18, all claims under the revenue support program had been deal with in one of two ways – automatically or 60% initial payment. As for the expense reimbursement support program, claims filed up to December 3 have been deal with, but delays have indeed occurred mainly because of the high number of claims  (above 40,000). The CPA Institute is willing to help follow up on an individual basis if provided with details and the exact date the claim was filed – to do so, email:  [email protected] or WhatsApp: 03-35116601.

Evacuated workers:

The ITA Director stated in a letter of October 31 that compensation would be paid up to 2.5 times the national average wage regarding November. After system teething problems, the compensation fund is requesting that proof of entitlement be filed (again where applicable) to be dealt with on an individual basis.

Low base sales:

Compensation applies to reduced sales compared with a base period, usually a month ago. New regulations are on the way, once approved by the Knesset Finance Committee, to adjust the base period in situations where sales in the original base period were also low due to maternity leave, pregnancy leave or IDF reserve duty.

Frontline Businesses:

The ITA has “opened the possibility” for businesses in the frontline areas in the North and South to request advance compensation payments regarding November-December 2023 similar to October

Tax enforcement freeze:

The ITA has announced that accountants of businesses affected by the war may continue request on the ITA system for accountants for a stay of tax collection and enforcement proceedings up to April 30, 2024 – For example “The businessman is a soldier called up to IDF wartime reserve duty”. Such requests should be input into the various ITA systems. This applies to soldiers, Police, jailers and firemen. In other cases where a tax debt arose before the war, a bank lien (freeze) will only be imposed after a telephone inquiry. Where a tax debt arose after the war started, a warning will be sent to the taxpayer’s “personal area” and to the ITA system for accountants.

The ITA has also issued fresh instructions allowing Assessing Officers to allow arrangements for paying tax by installments if collateral is provided, such as a pledge on cars or real estate.

Inventory (stock) count:

Normally an inventory count is required annually on (or around) December 31, but it may be postponed this year up to March 31, 2024, with appropriate adjustments of the figures back to December 31, 2023. In exceptional cases, such as frontline businesses, additional relief may be requested from the local tax office. A revised audit standard regarding year-end inventory is also awaited.

National Insurance Institute (NII):

The National Insurance Institute has announced that 100% of fines will be cancelled for late filing and payment of national insurance debts that deal with these by December 31, 2023. Those with payroll audit issues are covered by separate procedures).

As for unpaid leave, the procedures for October and November are to be extended apparently to December. The employer must make sure to report the exact lay-off date notified in writing to the employee.

So called “retroactive lay-offs” by an employer (and unemployment pay from the NII) on or after December 1, 2023 will no longer be permitted by the NII.

As for freelancer reservists called up to the IDF, NII systems have been adapted to pay call-up compensation monthly not only at the end of the call-up period. This is based on the income figure used as the basis for paying monthly installments to the NII, so the freelancers or their accountants should make any basis adjustment needed fast.

Anyone who wants to pay 2022 NII arrears by the end of 2023 to get a 52% deduction for 2023 income tax purposes should apply fast to do so if not yet assessed by the NII system.

Back to work grants:

The NII is offering special grants of NIS 3,000 per month to: (1) Israeli resident employees who normally live in a front line area that work anywhere in Israel, or (2) Israeli resident employees that live anywhere in Israel and work for an employer in a frontline area. Frontline includes Ashkelon. The grants apply to November and December and may be extended to March 2024. Comment: It is unclear whether the grants are taxable.

Next Steps:

Please contact us to discuss any of the above matters further, or any other matter.

As always, consult experienced legal and tax advisors in each country at an early stage in specific cases.

[email protected]

(c) Leon Harris 24.12.23