Are foreign trips a deductible expense in Israel?
A company needs to promote its business abroad. Can travel be a deductible expense in Israel?
It's often necessary for a company to travel abroad to promote its business. Whether for transactions, business meetings or trade shows, travel is becoming increasingly frequent.
The question is, can foreign travel expenses be "recognized" as a business expense?
This has a direct impact on the amount of INCOME TAXES and the amount of social security contributions in Israel. (Bitouah Léoumi).READ ALSO: SIMULATION OF THE BITOUAH LEOUMI OSSEK MOURCHE / OSSEK PATOUR
A brief review of the issues to be addressed:
- Is a trip a deductible expense in Israel?
- Under what conditions?
- Is there a limit to the amount I can spend?
- Can vacations be added to the expenses?
How are foreign travel expenses recognized?
Firstly, it is essential that travel expenses are directly related to business activities and that they are necessary to generate revenue.
In other words, you need to have customers abroad. Or that you're looking to develop your business abroad.
This is in line with the objective of article 17 of the Israeli tax code: to be a deductible expense in Israel, the expense must be intended to help generate income for the company.READ ALSO: TAX IN ISRAEL: ONLINE SIMULATION.
Here are a few examples:
1. Travel expenses abroad to study the latest developments and production techniques in which the taxpayer is involved.
In this case, the expense will be recognized.
2. Foreign travel expenses that are part of day-to-day operations, such as: travel to provide services to customers abroad; or travel required to complete a transaction.
Here too, the expense will generally be booked as a deductible charge in Israel.
3. Travel to buy equipment.
The expense will not be booked.
In this case, the cost of travel for the purchase of equipment must be added to the equipment purchased. We therefore add the cost of the ticket and other expenses (see below) to the price of the merchandise.
4. Travel expenses abroad for the preparation of a new company patent or business expansion, such as research, development or customer prospecting.
The income tax interpretation in this case is that the expense will be recognized as a capital loss, and the charges will be non-deductible.
5. If a document or declaration is submitted which could have been completed without travelling abroad, the expense will not be charged.
For example The signature of a contract instead of an electronic signature.
What do I need to provide in order to recognize the expense of a trip abroad?
In order to prove that foreign travel expenses are "real", the following information must be provided:
- Travel destination.
- Purpose of the trip.
- Number of days abroad.
- The sum of the various expenses, itemized and broken down by type of expense. For this, we recommend a doh nessiote lehoul - foreign travel declaration.
- Details of accommodation expenses.
- Collect receipts and invoices for airline tickets.
What amounts are expensed when airline tickets are purchased?
- Economy / business class flights - 100% of the ticket price.
- First class flight - 100% of business class fare.
What amounts will be counted as accommodation expenses?
- If you are traveling abroad for less than 90 nights:
1. For the first 7 days of accommodation - up to 335 $ per night.
2. From the 8th night
- If the expense is less than 147 $, the entire expense will be booked.
- If the expense exceeds 251 $, the expense will be recognized at the rate of 75% with a minimum of 147 $.
- When traveling abroad, for a stay of more than 90 nights
Up to 147 $ per night.
How much is the daily flat rate granted by the tax authorities in Israel - without the need for receipts?
- If accommodation is required - up to 94 $ per day. (This amount is added to the cost of accommodation).
- If no accommodation is required - up to 157 $ per day.
How much will I have to pay in expenses when leasing a vehicle abroad?
The amount to be booked as a car rental expense can be as high as 74 $ per day.
In some countries, the above-mentioned maximum limit will be increased by 125%.
The countries are as follows:
Greece, Australia, Luxembourg, Italy, Norway, Iceland, Spain, Ireland, Angola, Finland, Belgium, FranceKorea, Denmark, Cameroon, Hong Kong, Sweden, United Kingdom, Switzerland and Taiwan.
So if no accommodation is required - up to 196 $ per day.
What is the exchange rate for foreign currency expenses?
The dollar exchange rate on the day the expense was paid is the exchange rate on which the expense will be determined in Shekels.
Important to know!
Charges recognized even when they concern a company employee.
Foreign travel expenses will be recognized for tax purposes if they have been expended for the production of income, even if they were issued by the employer's employees.
Appropriate receipts must be enclosed in such cases, such as:
- plane tickets,
- travel expenses.
Documents including expenses for accompanying persons must be printed and displayed separately.
If the cost of accommodation also includes payment for meals, you will be asked to provide proof of these expenses:
- passenger's name,
- his job,
- the travel destination (each country separately),
- the purpose of the trip,
- business days abroad: Business Days.
- And the amount spent on each expense item.
Traveling longer? Don't panic: there's compensation for your children's education
If the taxpayer is abroad for a continuous period of more than ten months, he is entitled to education expenses for the upbringing of his children under age 18 during the tax year.
In a nutshell:
Companies needing to travel abroad can claim many of their travel expenses, thereby significantly reducing their taxes and social security contributions.
Your questions - our advice
- Is the calculation the same for an Ole Hadash?
- What is tax optimization for an Olé Hadash who travels a lot?
- How long do I have to claim my travel expenses?
- Can an employee of a foreign employer also recognize his travel abroad?
- What happens if I travel abroad for Business but I'm also traveling with my family?