Who has to file a tax return in Israel?

Israeli tax return

The Israeli tax return is an annual report summarizing all the taxpayer's income. The Israeli tax return is made on form 1301. In this article, we will detail who is required to file a tax return in Israel. It is advisable to pay close attention to how the declaration is completed and when it is due. Any delay or misrepresentation may result in penalties.

How do I file my tax return in Israel?

On form 1301, you must declare all your income for the tax year in question. You must also indicate any tax credits and credits you may be entitled to.

Before submitting your tax return to Mas Ahnassa, you must first post it on the Mas Ahnassa website (שידור מקוון).

The deadline for submitting your tax return is currently May 31 of the tax year following the year in which the return is filed. Thus, the tax return for the year 2022 must be submitted by May 31, 2023.

However, if your return is submitted by a chartered accountant, you can obtain an extension and file your return by November 30.

Tax in Israel : Make your Simulation online.

Who is required to file a tax return in Israel?

So far we've seen how to file a tax return, but who is obliged to file it?

There's a rumor that in Israel only a "privileged few" are obliged to declare income. This rumor probably stems from the fact that Olim hadashim are tax-exempt for 10 years after their aliyah, on income earned abroad.

However, the tax code in Israel requires some people to file a return anyway, so here is a non-exhaustive list of taxpayers who must file a return: 

(For ease of reading, we've separated the list by groups of people).

ALSO READ: Tax exemption for 10 years after Aliyah

A - Self-employed or shareholders in Israeli companies.

1. A shareholder owning more than 10% of the shares of an Israeli company. (בעל מניות מהותי בחברה).
2. A Ossek Mourché.
3. A Ossek Patour.

B - Employees or taxpayers with "passive" income.

1. An employee with a gross annual income of over Nis 665,000 (in 2021).
2. A taxpayer with interest income in excess of 659,000 Nis per annum (in 2021).
3. A taxpayer who has received income from the sale of listed securities in excess of 2,583,000 Nis (in 2021).

C - Persons receiving a pension from abroad.

1. If you receive a retirement pension from abroad, you must file your tax return in Israel. You may not have to pay tax on your pension. However, you still have to file a tax return.
2. However, if the person is within 10 years of his aliyah, he will be exempt from making it.

D - People who do business abroad.

1. A taxpayer with foreign income.
2. A taxpayer who has made transfers abroad in excess of 345,000 Nis during the tax year. These transfers may be made all at once, or in instalments.
3. A taxpayer with assets abroad worth more than 1,917,000 Nis (in 2021). Therefore, if you have a bank account abroad with assets in excess of 1,917,000 Nis, you must file an annual tax return. However, there is an exception for olim during the 10 years following the date of aliyah.

E - People with income from real estate.

1. A taxpayer with property income in excess of 345,000 Nis a year (in 2021).
2. A taxpayer with monthly rental income in excess of 5,196 Nis (in 2022). If the taxpayer has opted for the progressive income tax scale for rental income.
3. A person with a taxable income of surtax, Israeli wealth tax (מס יסף) gross taxable income in excess of 663,240 Nis (in 2022).

ALSO READ: How to optimize property taxation in Israel?

F - Decision by the tax authorities.

Anyone asked by the Israeli tax authorities to file a tax return. In fact, the tax authorities have the right to ask anyone to if he suspects any anomalies.

Personal taxation, but one declaration per tax household

In Israel, taxation is personal. Therefore, all the above amounts refer to each spouse separately.

However, it is important to note that the tax return must include the spouse's income.

Tax calculation in Israel

Once you have submitted your tax return, the Israeli tax authorities will determine whether it is necessary to top up the taxes already paid, or whether you are entitled to a tax refund.

You should also know that if you have overpaid taxes, the tax authorities will reimburse the overpayment, with interest.

On the other hand, if you have to pay additional taxes, you'll also have to pay interest for the period.

Your questions - Our advice :

1. Do the tax authorities will widen the "restricted circle" of taxpayers required to file returns?
2. If I've received a tax return to fill in, what income should appear on it?
3. I often travel abroad, for personal and not professional reasons. Is this still suspect in the eyes of the Israeli tax authorities?
4. What are the risks if I don't declare?
5. How can the tax authorities know the source of my foreign income?
6. I have Crypto income. What are the risks of not declaring it?

As you can see, the risks involved in tax fraud are enormous. Tax declaration in Israel is a sensitive and complex subject. A number of parameters are involved, and professional advice is highly recommended.

The service offered by a chartered accountancy firm ensures proper tax planning and optimization. In addition, you can the assurance that all credits and tax benefits to which you are entitled are taken into account.