As the tax year comes to an end, these final days are your last chance to influence your year tax liabilities for the year. We’ve prepared a few tax tips which may come in useful:
Time your income and expenses
Your tax liability is calculated on your net income (i.e. your profit after all your expenses). The more expenses you have, the lower your profit and the lower your tax bill.
But, you’re in control of your income and expenses, and towards the year end you may be able to control when they take place. If you can settle your expenses before the start of 2022, this may reduce your 2021 profit.
Pensions and Keren Hishtalmut contributions
For individuals under the age of 55 registered as an Atzmai, contributions to a pension fund are a legal requirement. If you don’t contribute the correct amount, you may be subject to a penalty.
Additionally, contributions into your pension fund and Keren Hishtalmut will help reduce your tax liability. But the contributions must be paid out during the tax year. If you haven’t yet up a pension fund or Keren Hishtalmut, it’s not too late to do it before the end of the year.
Donations to Israeli Charities approved under the ‘Section 46’ program will earn you a tax credit of 35% of the amount donated (Corporations receive a 23% tax credit). The tax credit will be attributed to the year of the payment. So, now’s your last chance to donate for this year.
Bituach Leumi payments
Of your payments to Bituach Leumi, 52% are recognised as a tax-deductible expense. However, the deduction is given for the year during which you made your payment. So, if you’ve under paid your Bituach Leumi contributions, or if you’ve got an outstanding balance – pay before the year end to reduce your tax liability this year.
Stock Count (31st December)
For those businesses trading merchandise, you must do a stock count for the year end. This is a vital element of calculating your annual profit. Many businesses offer discounts and sales to clear out old stock. This not only boosts the income before the year end but also helps show healthy numbers on the financial statements.
More tax tips
Each business is unique and the tax tips for the year end may be different when taking into consideration your circumstances.
– How does reducing your income this year affect you next year?
– Are there considerations to take into account if you’ll be applying for a mortgage?
If you’ve got questions, don’t hesitate to get in touch with our team so that we can advise you further.