Questions and answers declaration of assets in Israel
In this article, we've put together a list of questions and answers about declaring your assets in Israel.
I've heard of the Atsarat Hon - הצהרת הון , what is it exactly?
The Atsarat Hon - הצהרת הון, literally means a "declaration of assets". This declaration must be made on the personal assets & liabilities of a tax household concerning the requested date.
For example: how many assets and liabilities did you have on December 31, 2021?ALSO READ: Definition of Atsarat Hon - הצהרת הון
Who is asked to fill out an Atsarat Hon?
The Atzarat Hon is generally required of anyone opening a business as a self-employed status (Ossek Patour or Ossek Mourché), but also for any shareholder who holds more than 10% of shares in a limited liability company, Hevra Baam (חברה בעמ).READ ALSO: THE OSSEK MOURCHE GUIDEREAD ALSO: THE OSSEK PATOUR GUIDE
How much time do I have to make my Atsarat Hon?
From the day the request was sent to you by the tax office, (date of request - תאריך דרישה) you have 120 days to submit your declaration of assets.
This date appears at the top of the declaration request sent to you by the tax office.
Can I change my tax return after I've sent it in?
The taxes in Israel has adopted a very firm stance on this issue, and only very rarely grants the right to amend a declaration of assets already submitted.
What are the consequences if I don't return my Atzarat Hon on time?
Late submission of your Atsarat Hon, or late submission of supporting documents for your Atsarat Hon, will result in penalties for each month of delay, in accordance with section 188 (7) of the Israeli Taxation Code.
You should also be aware that a delay in filing your tax return is considered a criminal offense, in accordance with section 215 of the Israeli Tax Code.
Atsarat Hon, what's it for?
The Atsarat Hon is one of the Israeli Tax Office's favorite tools for controlling and monitoring taxpayers. Using your asset declarations, it can check and compare whether what you declare every year really reflects your income.
In other words: were all the assets in your estate acquired with "declared money"?
How does the Israeli tax office use my return?
The procedure is simple: the tax office in Israel asks you to complete a declaration of assets every 5 years on average, and notes any unexplained differences between the various declarations.
If there is an unjustified increase, the tax office in Israel will be entitled to ask you to pay tax on this "unexplained difference".
What can be considered an unexplained difference?
To answer this question, let's take a simple example. In his last asset declaration, which concerned his situation on December 31, 2015. Mr Cohen declared having assets of 2 million shekels (1 House, 1 car etc.).
In his most recent declaration of assets, which concerns his situation on December 31, 2020 (5 years later). This same Mr Cohen declares that his assets now total 8 million shekels (2 houses, 2 cars etc.).
In his annual financial statements, Mr Cohen declares that he earns 1 million shekels net / year.
There is therefore a difference of one million Shekels that has not been explained. The tax office in Israel is entitled to ask Mr Cohen to pay the tax on this difference.
What do I risk if I make a "false declaration"?
A false declaration is considered a criminal offence, in accordance with articles 216 and 220 of the Israeli Taxation Code. You will therefore be liable to criminal prosecution, which can result in heavy fines and prison sentences.
Can I complete my asset declaration on my own?
Yes, the declaration of assets can be made by the taxpayer.
However, given the complexities involved, and the risk of misrepresentation. We strongly advise you to use the services of a chartered accountant. This will save you a lot of hassle when you have to explain unjustified differences to the tax inspector.
The Chartered Accountant's job is not just to collect the accounting documents and put them in a nice table.
His real added value lies in the fact that he will check and compare your various declarations himself. He will look for documents to justify any differences. And he'll already be in a position to answer any questions from the tax inspector.
Is the first declaration of assets important?
The first declaration of assets is of paramount importance. It represents the basis for all future calculations and comparisons made by the tax authorities.
In concrete terms, when you file your next returns, the tax office in Israel will, among other things, make the following calculation:
- Your heritage to date.
- Less your Wealth at the time of your previous declaration.
- Let's remove your cash inflows over this period.
- Less the taxes and social security contributions (bituah Leoumi) you paid over that period.
- Less your "living expenses" (Otsaot Mihya - הוצאות מחיה).
If the tax office in Israel comes up with a positive result after all these calculations. It will take some imagination to justify this "unexplained difference".
In a nutshell:
The declaration of assets is one of the areas to be taken most seriously, and the Israeli tax authorities take a great interest in it.
Failure to do so can result in a tax audit.
Purpose of the declaration of assets :
Check l'evolution of the assets of each taxpayer and ask questions when inconsistencies appear.
Our firm of chartered accountants in Israel can advise you on the best way to prepare your tax return.