The Israeli Tax Authority (ITA) has continued its tradition of issuing rules with or without Knesset approval. This time the issue is meal expenses for foreign sportspersons. The ITA rules leave many big unanswered questions. Even the Israeli CPA Institute is concerned – we may all be affected when we travel and eat. Yet the story began in a totally different context.

Background:
On June 9, 2024, the ITA issued an announcement on “Allowing Meal Expenses of Foreign Sportspersons”. The announcement says the Israeli Supreme Court determined that the deductible meal expense of a foreign sportsperson is the amount he/she spent in practice up to the limit in the tax regulations, but that is not global fixed amount. (Hapoel Nir Ramat Hasharon vs. Kfar Saba, civil appeal 4603/22 of 28.6.23). The judgement “noted the ITA announced it will move to formulate criteria regarding the documentation needed to prove the daily amount of expenses of foreign sportspersons if they pay for them not the club.”
In practice, Israeli tax regulations allow sportspersons, such as US basketball players, to deduct accommodation expenses, a per diem amount for food expended of NIS 360 per day (in 2024), and a maximum Israeli tax rate of 25%.
The problem was the word “expended”. Until now, it was customary to deduct the full NIS 360 even if no food receipts are retained – who retains their grocery bills? Now grocery bills are in the spotlight.

The new rules:
The ITA announcement says foreign sportspersons must file documentary evidence regarding their dates in Israel and provides two ways for dealing with food expenses on days in Israel if the employer didn’t pay anything for meals on those days: (1) provide no supporting expenses and claim only 30% of the limit in the regulations i.e. NIS 108 per day in 2024 (30% of NIS 360) or, or (2) provide supporting documents for all claimed expenses up to the limit in the regulations. Whatever is chosen applies the whole tax year concerned. Supporting documents include receipts, and charge details on credit cards, debit cards, digital wallets, bank phone apps and any other documentation.
Either way, the foreign sportsperson must file a statement from their employer saying how much the employer paid for meals and the dates. 

What the CPA Institute said:

The Israeli Institute of Certified Public Accountants warned its members on June 9, 2024: “Although the rules relate to foreign sportspersons, note especially that the position of the Tax Authority regarding the deductibility of expenses without supporting documents could be tested in other cases.”

Which other cases?

Many other Israeli tax regulations specify meal expense amounts, unrelated to sportspersons. Foreign journalists in Israel who hold an FPA (Foreign Press Association) card may enjoy a similar Israeli tax regime to foreign sportspersons for up to 3 years, including meals of up to NIS 360 (in 2024). Other foreign experts working in Israel enjoy the same meals expense deduction for a year – an expert is a foreign resident who earns over NIS 14,800 per month (in 2024).

And Israeli residents who travel abroad enjoy relatively high meal and other expense limits expressed in US dollars – up to $97 for meals per day in 2024 if accommodation expenses are also deducted from income, up to $162 for meals if no accommodation expenses are deducted. Moreover, these meal amounts are increased by 25% for many countries (assumed to have a high cost of living). These countries are: Austria, Australia, Italy, Iceland, Ireland, Angola, Belgium, Germany, Dubai, Denmark, Netherlands, Hong Kong, UK, Taiwan, Greece, Japan, Luxembourg, Norway, Spain, Oman, Finland, France, Qatar, Korea, Cameroon, Canada, Sweden, Switzerland.

So if an Israeli resident travels to any of these countries to work and does not claim accommodation (e.g. they stay with relatives…), they may claim meal expenses of up to $202.50 (=$162 plus 25%). Now it seems they should retain their meal and grocery receipts.

What else does the ITA typically check? In our experience, the ITA check the airport passport control records to see whether other family members accompanied the traveller – if so was the purpose really vacation (non-deductible) not work? And questions arise about the travel days themselves – who works at the airport or on the flight?

Comment:
It is unclear what is the ITA’s authority for the new rules. The Supreme Court in the Hapoel case only “noted” the ITA’s intention to formulate “criteria”. The Supreme Court did not relate to the 30% limitation if no documentation is retained, as the above rules had not yet been issued.

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 25.6.2024