Following the recent surprise collapse of Silicon Valley Bank (SVB), a leading bank for the high tech sector, a number of Israeli companies have apparently experienced short term cash flow difficulties. This is despite the announcement of March 12 from US Federal Reserve Bank offering full cover for holders of deposits at the bank if they haven’t yet withdrawn their money.
Consequently, the Israeli CPA (Certified Public Accountants) Institute announced to its members on March 13 that it had been in contact with the Israeli Tax Authority (ITA) regarding the following stopgap relief measures:
- Withholding taxes: This mainly refers to taxes withheld from salaries. As requested by the CPA Institute, regional assessing officers at the ITA may on a case-by-case basis consider extending the upcoming reporting date (“March reporting”) and allowing payment of such tax by installments if necessary. Such extensions should not trigger fines, liens (bank account freezes) or any criminal reports. Comment: The term “March reporting” in the announcement is unclear. Presumably the intention is tax withheld from February salaries and payable to the ITA mid-March 2023 around now? And what about tax withheld from March salaries payable to the ITA mid-April 2023? It will be up to each affected company to request what it needs from its own Assessing Officer,
- Remitting money abroad to pay salaries to foreign employees (especially American employees): The ITA may issue confirmations needed by Israeli banks to move money out of Israel to pay salaries of foreign employees. This should be possible via the existing “green channel” for transferring money abroad. The idea is to move money quickly without Israeli withholding tax to a foreign affiliated company if money is blocked at SVB. Currently withholding tax exemption is normally restricted to $250,000 per year for foreign services unless special permission is obtained for that transaction or in advance
The term “March reporting” in the announcement is unclear. Presumably the intention is tax withheld from February salaries and payable to the ITA mid-March 2023 around now? And what about tax withheld from March salaries payable to the ITA mid-April 2023? In practice, it will be up to each affected company to request what it needs from its own Assessing Officer and check out what protection the US Federal Reserve Bank is offering.
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.
(c) Leon Harris 16.3.2023