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Accounting in Israel
Accounting is the backbone of any successful economy, and Israel is no exception. This comprehensive guide introduces you to all aspects of accounting in Israel.
From the management of reporting periods to different company structures, tax payment methods and the frequency of tax and social security returns, we cover every stage of accounting in Israel.
Thanks to this article, you'll have a complete understanding of what makes Israel's financial machine tick.
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Accounting in Israel
1. Declaration Periods: Timing, Timing, Timing
One of the first things every Israeli contributor needs to understand is reporting periods. In a world where time is money, punctuality is essential. Reporting dates vary depending on the type of income and the status of the business, but a few key milestones are worth noting:
- Personal income tax : Israeli residents must declare their income annually, usually by April 30 of the following year.
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However, you should be aware that if you are represented by a caccounting firmIn most cases, your firm offers "extensions", enabling you to file your tax return up to December 31st of the following year.
When do we advise you to submit your tax return?
Corporate income tax : Israeli companies declare their income every year, but the deadline depends on the company's fiscal year-end.
Generally speaking, companies must file their balance sheet by May 31 of the following year.
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However, if you are represented by an accountancy firm, your firm generally has "extensions", which means that your company's return can be submitted up to April 30 of year N+2. Example: The balance sheet for 2022 can be submitted up to 04/30/2024.
When do we advise you to submit your tax return?
VAT - Maam: For companies charging VAT (Osek Mursheor Hevra baam ), VAT declarations are made every month, or every 2 months, depending on the company's annual sales.
Taxes on ancillary income (rent, dividends, interest, capital gains, etc.) :
Ancillary income, such as rents, dividends, interest and capital gains, must be declared at the same time as the taxpayer's or company's annual tax return.
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However, it is important to note that the taxpayer is required to pay an advance on the tax corresponding to this income and to file an interim return within 30 days of the sale of the property.
This interim declaration enables the tax authorities to obtain precise information on the income generated by the sale of the property, in order to calculate the tax due more accurately. The taxpayer is therefore obliged to comply with this requirement, and to provide all the necessary information within the allotted time.
What happens if I file my tax return in Israel late?
It's important to note that failure to comply with these obligations may result in penalties and interest for late payment, so it's essential to comply with current tax rules regarding the declaration and payment of taxes on ancillary income.
Penalties are generally as follows:
- for individuals: the penalty is 500 shekels per month of delay,
- for a company (Hevra Baam): the penalty is 4,000 Shekels per month of delay.
Not to mention interest and indexation on the amount of tax to be paid.
The amount of the fine is calculated up to the day the declaration is filed.
Is there a tax statute of limitations in Israel?
There is no tax statute of limitations in Israel if you fail to declare your income.
This means that the tax authorities can claim payment of undeclared or unpaid taxes, even after a certain period of time has elapsed. Unlike some countries where there is a tax statute of limitations which limits the time beyond which the tax authorities can no longer reclaim taxes, in Israel there is no specific time limit.
It is therefore essential to comply with tax declaration and payment deadlines in Israel to avoid penalties and interest on late payment. Failure to comply with these obligations can have significant financial consequences, including fines and late payment interest calculated on the amounts due.
It is advisable to consult a chartered accountant or a tax specialist to ensure that you comply with your tax obligations in Israel, and to benefit from assistance in managing your tax liabilities.
In conclusion, in the absence of a tax statute of limitations in Israel, it is essential to comply with tax filing and payment deadlines to avoid penalties and problems with the tax authorities. Good accounting and tax management, in collaboration with qualified professionals, is essential to ensure tax compliance and optimize your financial situation in Israel.
2. Different Types of Business: Choose Your Adventure
Israel offers a range of business structures, each with its own specific tax advantages and obligations. Whether you're considering an LLC, a sole proprietorship, a joint-stock company or operating a foreign business, each option has its own particularities.
Choosing the right structure is essential to optimize tax and liability.
3. Tax payment methods: ease and convenience
Paying your taxes is a relatively straightforward process in Israel. Payment options include:
- Online payment : The tax department's online payment service enables taxpayers to pay their taxes electronically, eliminating the administrative hassle.
- Payment by direct debit : Simplify your life by authorizing a direct debit to meet your tax obligations at regular intervals.
- Payment by cheque : Although less and less common, payment by cheque is still possible, especially for taxpayers who prefer the traditional method.
- Cash payment : In certain situations, cash payment is permitted, although it is not the norm and may trigger a tax audit.
Payment frequency varies according to the type of tax and the company's activity.
Some taxes are monthly, others bimonthly, and still others annual.
Digital invoicing system
At Dray & Natco, we've set up a digital invoice system to simplify our customers' accounting. Thanks to this system, our customers no longer need to travel and bring accounting documents in person. They can simply send their invoices and other documents electronically, enabling faster and more efficient processing. This helps to reduce processing times and minimize potential errors associated with manual data entry. It also facilitates collaboration between our accountants and our customers, ensuring a secure and transparent exchange of information. By using our digital invoicing system, our customers can save time and concentrate on their core business, while rest assured that their accounts are being handled professionally.
Israel is no exception in the race to modernize accounting. The digital invoice system has revolutionized the way companies manage their finances. There's no longer any need to carry around piles of physical invoices. Electronic invoicing reduces printing, storage and distribution costs, while improving transaction traceability.
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Our firm, Dray & Natco, is proud to offer our customers an innovative and practical accounting service. We have developed our own accounting software with a user-friendly interface in French.
This software gives our customers access to a personalized customer area where they can consult their invoices, tax returns and other important documents. With this tool, our customers can manage their accounting with ease, having all the necessary information at their fingertips.
OUR COMMITMENTS
Dray & Natco is recognized as Israel's leading accounting, consulting and tax optimization firm, offering invaluable support to Franco-Israelis.
We're here to help you set up your business, manage your accounts and optimize your tax situation in Israel.
We offer our customers effective solutions that combine in-depth tax and accounting expertise with specific economic and financial knowledge. This enables us to respond appropriately to the strategic challenges faced by companies, start-ups and individuals.
DRAY & Natco combines the expertise and resources of a major tax and accounting firm with the flexibility and proximity that our customers demand. We make your issues and challenges our own, and that's how our firm has built up a reputation for reliability over many years. We cater for individuals and companies wishing to set up business in Israel. With our triple expertise (Israeli, French-speaking and English-speaking), we can help with all aspects of setting up in Israel and assisting new immigrants.
Dray & Natco - history
The firm founded by Elyaou Dray and Nathaniel Dray was originally known as Dray & Dray.
In 2019, Boruch Levenson joined the team to create the English-speaking department, strengthening the firm's international capabilities.
However, the expansion didn't stop there. In July 2023, Natanel Cohen, founder of Natco Consulting, decided to join Dray & Dray, leading to the merger of the two entities to form "Dray & Natco".
This merger combined the strengths and complementary expertise of the founding members, creating a unique synergy within the firm.
By combining the skills and resources of its founding members, Dray & Natco now offers its customers a comprehensive, high-quality service. Whether it's setting up a new business, accounting management or tax optimization in Israel, the firm is there to support its clients every step of the way.
No. 1 accounting firm in Israel
Dray & Natco is ranked as the "best accounting firm in Israel" by the Israeli Institute of Social Security.
In fact, a quarterly ranking is published for each firm in Israel. Since April 2023, Dray & Natco has been ranked number one among Israeli accounting firms.
This recognition testifies to our commitment to excellence and our ability to deliver high-quality services to our customers.
