In most countries, taxpayers know when is their deadline for filing tax returns. Not in Israel.
Monthly Reporting Deadlines:
Accountancy circles have recently been buzzing with excitement and trepidation. Most businesses are required to file monthly/bimonthly tax and VAT returns by the 15th day after the end of each month or bimonthly period. But by concession, they have been allowed to extend the deadline by four days to the 19th if the returns are filed online and the taxes paid online.
The extra four days are vital because business people need a good week or so to gather together their income and expense paperwork. Then writing up the books and reconciling bank and credit card statements involves grunt work and takes time. If the monthly returns are filed even a day or two late after the 19th, fines are automatically imposed. If businesses are late several times, their “public bodies” certificate may be revoked. This means they can no longer do business with governmental bodies or public companies, which can be grim.
So when the Israeli Tax Authority recently indicated it would cancel the four day extension to the 19th and restore the deadline of the 15th, accountants and bookkeepers of smaller businesses were aghast. Protest groups opened up spontaneously on WhatsApp.
Few other countries have such strict monthly tax reporting requirements. These deadlines don’t deter the black economy, they pressurize law abiding SME businesses.
Fortunately, the ITA stepped back from the brink. On April 2, the ITA announced that the Director of the Tax Authority has decided to continue allowing until the end of 2017 the present practice of online reporting and payment of income tax, payroll taxes and VAT by 6.30 p.m on the 19th of each month or bimonthly period.
A separate deadline of the 23rd day after each month-end will continue to apply to larger businesses that are required to file detailed online VAT returns.
This month, all monthly deadlines have been extended to April 24 thanks to the Passover holiday.
Who has to file an annual tax return?
The rules for annual Israeli tax returns are complex – but generally annual tax returns are required from anyone in business and anyone whose income was not taxed in full upon receipt. Most salary earners and most investors in Israeli financial institutions are exempt from filing tax returns if they have no other income because full tax is usually withheld at source. If in doubt, get advice from an accountant or a tax office.
Online filings are usually required from you if you must file a tax return and you have income from a business, profession or employment. Even if you are required to file online, you must still file the return online as well as the old-fashioned way (on paper).
What are the new deadlines for filing 2016 annual tax returns?
The tax year in Israel is the calendar year ending December 31.
Annual tax returns, when required, are due by April 30 in the case of individuals and businesses that keep single entry books and May 31 in the case of businesses that file online or keep double entry books (with debits and credits).
However the ITA has admitted that its website will not be ready to accept online filings for 2016 before May 2017. Therefore, the ITA has announced major extensions.
For individuals, the new filing deadline is June 29, 2017 for online filers and May 29, 2017 for other individuals. For companies, in principle the new deadline is July 31, 2017.
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. In the case of individuals, accountants must file 15% of registered client returns for 2016 by July 31, 2017, 40% by September 28, 2017 and 100% by November 30, 2017.
In the case of companies, charities and trusts, accountants must file 15% of registered client returns for 2016 by August 31, 2017, 60% by January 31, 2018 and 100% by March 29, 2018.
Do these deadlines work? Unlike the United States, there is no April 15 rush. But last year (2015 tax returns) the ITA’s computer was apparently not programmed to respect the ITA’s special arrangement with the CPA Institute. The result was a flood of penalty notices that had to be appealed….
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