It is a fact of life that sometimes a business or investment doesn’t work out. In this situation, you are going to end up with a loss; i.e. More money was spent than recouped. In general, a loss can be used to offset other income or gains, as per the rules set out below. But before that, there are three important rules about claiming losses that apply across the board: A. If you make a loss in a situation where theby the profit would not have been taxable, the loss in such a situation cannot be claimed. B. It is normally required that a loss be offset as soon as possible. If

So you’re filing an Israeli tax return, either because you are required to do so (see here for more) or because you want due (and presumably are due a refund, see here for more). The first step is to gather all of the relevant information regarding your income (for both spouses if relevant) during the year in question, as well as the relevant certificates and proofs that you may need in order to claim deductions and credits, as appropriate, as well as proofs of tax withheld at source. All of this will be inputted into the main tax form (form 1301). Be careful though, there may only be three pages

This post is a similar post from last year, with the required amendments etc. pertinent to the 2013 tax year. The deadline for filing your 2013 tax return is Monday 30th June 2014. The Tax Law states that every Israeli resident is required to file a tax return every year, and doing so late results in hefty penalties (in excess of NIS 1,000 for each month between the official deadline and the actual filing). That being said, a supplementary ruling to the law grants exemptions from filing if you (and your spouse – assume this the whole way through this post) meet certain criteria. The

As discussed previously, capital gains tax arises when an asset is sold; the gain being the difference between the proceeds and the cost. It is important to define both of these terms. Proceeds The law sees the proceeds as the “fair-value” of the asset. This is defined as the going market-rate between two unrelated parties, with the asset not subject to any restrictions or liens. In most cases, this is the same as the actual cost. The definition is designed to exclude situations whereby an artificially low price is set; the low price does not count for tax purposes. Cost The law delineates six different

As discussed in the previous post, CGT applies when an asset is sold. There are a number of situations where the sale of an asset is exempt from CGT. The corollary is that if a loss is made in such a situation, it cannot be offset against other gains. There are two main situations in which an exemption is given. 1. Gifts to the state or family As a general rule, the proceeds for the purposes of capital gains tax is the value of the asset, even if it is gifted. However… Gifting an asset to the State of Isrsel or one of the bodies associated

Within the income tax law there is a large section that deals with the taxation of capital gains. A gain (or loss) is made when an asset is sold; the proceeds are compared to the cost and the difference taxed accordingly. This post will set out some of the basic rules. In later posts I will discuss some of the nuances and exemptions available. What assets are subject to Capital Gains Tax (CGT)? Essentially, almost every asset is included in the law. There are two major exemptions: 1. Business inventory (profits made will be taxed as regular business income) 2. Movable assets used solely for

One of the frequently asked questions is what expenses a business can claim so as to reduce the tax bills. This is for both income tax (and by extension Bituach Leumi) and ma’am purposes (for osek morshe only). The basic rule is that you claim any expense that is wholly and exclusively for the purposes of generating income. This applies both for Ma’am and Mas Hachnasa purposes. There are some situations in which this will be obvious. Examples include professional licences/memberships and insurances, office rental, salaries / freelance outsourcers etc. But of course, there can be other situations whereby the situation is not

Since 2003, Israel has joined the rest of the Western world in taxing its residents on their worldwide income. Israel has also signed a number of Double Taxation Treaties with other countries which set out various rules for which country can tax certain incomes and in what scenarios. The Double Tax Treaties override the local tax law, so you get the best of both worlds. This post will assume that a Double Tax Treaty is not in force, or that the income is taxable in Israel anyway. Of course, advice should be taken on taxation of the income in the country of

As a freelancer, you are required to keep a set of records to keep track of your income and expenses. There are a number of professions that need to keep extra documents and records, and you should take advice from a professional to see if any of these apply to you. This post will set out the major requirements for most businesses. Larger businesses (based on both turnover and number of employees) have more stringent requirements. Again, specific advice should be taken in these situations. Income documents Any time you receive income, you are required to issue a receipt – קבלה. This will state