The Knesset has just passed an Economic Assistance Plan Law on May 4, 2026, authorizing government compensation for businesses affected by Operation “Roaring Lion” (Book of Laws 3525). The next day, the Israeli Tax Authority (ITA) announced that it has opened a limited online system for claiming payments on account of war compensation, and the full system should be open Sunday May 17, 2026.
The new law is complex. In practice, the accountant typically enters data into the ITA system and it crunches the numbers. Below is potted summary.
Aspects of the new compensation rules:
The new law amends an earlier Property Tax and Compensation Fund Law until the end of 2031. Let’s hope the war is over long before then.
The compensation generally relates to the qualifying period of March-April 2026, or May-June 2026 for certain businesses that apply a cash basis (e.g. professionals).
Compensation is payable to parties whose business is indirectly affected by war damage or inability to use assets. Separate compensation applies to property which takes a hit.
The preceding year is generally the calendar year 2025, but for new businesses it generally spans the month after registration till February 28, 2026.
For frontline businesses ordered to evacuate after October 7, the preceding year generally starts September 1, 2022, but if it started up in the period January 1, 2023-February 28, 2026, the preceding “year” is the period from the later of start-up or July 1, 2025 to February 28, 2026.
Larger businesses:
For affected businesses that registered for Israeli tax purposes by the end of February 2026 and had annual sales of NIS 300,000 to NIS 400 million in the base year, compensation may be available for qualifying expenses if the reduction in sales in the qualifying period exceeds 25%.
There are two types of “qualifying expenses”: (1) Fixed expenses, (2) Salaries. Various rules and limits apply to each including those mentioned below. The minimum is for these affected businesses is apparently NIS 4,980 per month.
Fixed expenses: Current input expenses for VAT return purposes in the previous year (adjusted pro rata if it was not 12 months) times a sales reduction factor ranging up to 22% times 2 (as the qualifying period is two months). Sales reduction 25%-40%: factor is 7%. Sales reduction 40%-60%: factor is 11%. Sales reduction 60%-80%: factor is 15%. Sales reduction over 80%: factor is 22%.
Salary expenses: One of the following minus any reserve duty reimbursements by the National Insurance Institute to the employer: (1) 75% of salary for the qualifying period times 1.25, or (2) average national monthly salary for national insurance purposes as known for March 2026 times the number of qualifying employees paid salary for that month times 1.25. A qualifying employee is one who’s employment wasn’t stopped in the qualifying period.
Smaller businesses:
Smaller affected businesses that had sales in the range NIS 12,000-300,000 in the base year may receive compensation ranging from NIS 1,864 to NIS 14,940 per month depending on base sales and sales reduction, times 2 as the qualifying period is two months.
Exceptions apply to public institutions, Kibbutzim, partnerships, certain builders and land owners, wholesalers, retailers, financial institutions, precious stones and others.
There is also a compensation cap of the following amounts times 2 (for a qualifying period of two months). For affected businesses with annual sales in the base year up to NIS 100 million the amount is NIS 600,000. For annual sales in the NIS 100-300 million range, the amount goes up 0.3% of the excess over NIS 100 million. For annual sales of NIS 300-400 million the amount is NIS 1.2 million.
Procedures:
As mentioned, the new online compensation claim system is scheduled to open on May 17, 2026. The ITA is supposed to reply to claims within 8 months and has 14 days to pay the balance of compensation due. If the ITA ask any questions, that stops the clock. There are 4 years to correct any errors.
Businesses that received compensation regarding June 2025, or October 2023 or November-December 2023 can claim an upfront payment now of up to 80% of that amount. Otherwise, they can request 80% times 7% (i.e. 5.6% apparently) of average monthly expenses in 2025. Different (less clear) rules and deadlines apply to Exempt Dealers i.e. with annual sales of up to NIS 122,833 in 2026 – clarification is awaited for them.
Alternatively, the ITA should pay an advance payment of 60% of the amount due within 21 days after a claim is filed and another 10% after 150 days.
Keep well!
Next Step:
Please contact us if you wish to discuss the above or any other Israeli business/tax topic.
As always, consult experienced tax advisors in each country at an early stage in specific cases.