Given the pandemic and the possibility of elections, it’s easy to forget that the Israeli tax year will soon end on December 31st. There are many things to consider, including those briefly described below.The big pictureThe pandemic means the Israeli government is facing rising spending to support coronavirus grants and falling tax revenues for many laid-off businesses and workers. It seems fair to assume that Israeli tax rates could rise soon, even if there is less income to be taxed.CompaniesBusinesses should consider, among other things: Coronavirus grant applications; Adjustment of monthly income tax rates (mikdamot); Income and time of income; Expenditure and time of expenditure; Inventory on December 31; other provisions or provisions. Is long-term project planning possible? What about donations? Most Corona grants are subject to income tax and not VAT. Some are subject to social security contributions. You can authorize new devices to temporarily accelerate depreciation. Tax law allows you to consider writing off bad customer debts and appropriately provide for proven doubtful debts, such as: B. in liquidation or other legal proceedings. Inventory depreciation or destruction requires notification of the local tax office.
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if (window.location.pathname.indexOf (“647856”)! = -1) {console.log (“hedva connatix”); document.getElementsByClassName (“divConnatix”)[0].style.display = “none”;} Inter-company transactions between related parties must be conducted on market terms. Transfer pricing studies are necessary and helpful. Related means mean at least 50% of all control or common control means. E-commerce is good but faces a bumpy tax ride in 2021. Hi-tech companies and online operators could levy higher taxes on sales and / or profits in the US, EU and elsewhere thanks to OECD and other initiatives. Main targets are companies that use online marketplaces (e.g. Amazon, Shopify, etc.), agents, warehouses, and fulfillment houses, or make digital deliveries. The Biden administration is expected to increase US federal taxes. International companies must therefore consider what measures are being taken. In Israel, so-called “wallet companies” (hevrot arnak) are faced with a series of rules that can convert the corporate tax rate of 23% on profits into income tax rates of up to 50%. This is possible if a related party provides management or officers or services for 18 months over a period of four years, or generates 70% of sales or profits from a customer or group. Also caught are loans to – not from – major shareholders over 100,000 NIS or the personal use of company assets. Check what needs to be done. Loans to 10% or more shareholders outstanding at the end of 2019 should be repaid (and not resumed) before the end of 2020. Are your pension, student fund (hishtalmut) and life insurance sufficient? Large shareholders in private companies should consider pension and severance payment funding within limits and ancillary plan funding under Amendment 190 of the Income Tax Ordinance. The mandatory pension fund applies to employees and the self-employed. Study funds (kranot hishtalmut) are very tax efficient if you contribute to mandatory rates every year for six years. Check with a pension / insurance specialist well before December 31 for monthly funding and annual top-ups.On the personal sideDo you and your spouse have an up-to-date will in each relevant country before the age of 120? If not, contact your lawyer immediately. Are you expecting an inheritance from abroad before others turn 120? In this case, you should plan for double taxation: inheritance / estate tax abroad and capital gains tax in Israel on a later sale.Personal investmentsReview foreign taxes and any Israeli tax credits or aliyah exemptions. Have you filed semi-annual Israeli capital gains tax reports on foreign securities sold?Aliyah tax breaksAre you a new or senior returnees who have lived abroad for 10 years? If so, are you optimizing the 10 year aliyah exemption for foreign income and profits? Most trusts with an Israeli resident settler or beneficiary are now taxable in Israel unless there is an aliyah exemption or other exemption in certain cases. Are your pension, study fund (hishtalmut) and life insurance sufficient? See above.In short, Israeli real estateIsraeli rental income over NIS 5,100 per month (in 2020) is taxable. There are several options above this level. Check which one is right for you. A tax credit of 35% can be granted for donations to recognized Israeli charities within certain limits (minimum NIS 190, maximum NIS 9,350,000 or 30% of income). For example, if you donate NIS 1,000, you may receive a NIS 350 discount on your Israeli tax bill. In certain cases, contact an experienced tax advisor in each country early on. The author is a chartered accountant and tax specialist at Harris Horowiz Consulting & Tax Ltd. [email protected]