{"id":8611,"date":"2025-10-05T12:16:16","date_gmt":"2025-10-05T12:16:16","guid":{"rendered":"https:\/\/aboulafia.co.il\/?p=8611"},"modified":"2025-10-05T12:16:16","modified_gmt":"2025-10-05T12:16:16","slug":"the-family-company","status":"publish","type":"post","link":"https:\/\/aboulafia.co.il\/en\/binyamin-radomsky-en\/the-family-company\/","title":{"rendered":"The \u201cFamily Company\u201d"},"content":{"rendered":"<p style=\"text-align: left;\">In regular circumstances, a company is treated as a seperate entity for tax purposes; in much the same way that it is treated separately for legal purposes.<\/p>\n<div style=\"text-align: left;\"><\/div>\n<div style=\"text-align: left;\">However, there is the option \u2013 under certain circumstances \u2013 for the income to be taxed directly in the hands of the shareholder.<\/div>\n<div style=\"text-align: left;\"><\/div>\n<div style=\"text-align: left;\">The first of these cases is the \u201cFamily Company,\u201d the \u05d7\u05d1\u05e8\u05d4 \u05de\u05e9\u05e4\u05d7\u05ea\u05d9\u05ea.<\/div>\n<div style=\"text-align: left;\"><\/div>\n<div style=\"text-align: left;\">There were fairly significant changes to these rules that came into effect as of 1st August 2013, and what follows are the new rules which apply to companies setting up after that date.<\/div>\n<div style=\"text-align: left;\"><\/div>\n<div style=\"text-align: left;\">\n<p style=\"direction: ltr;\">A company can only be considered a Family Company if:<\/p>\n<p style=\"direction: ltr;\">(a)\u00a0all of the shareholders are considered part of the same family for tax purposes. Essentially, this means (grand)parents, (grand)children, siblings and the spouses of the above.<\/p>\n<p style=\"direction: ltr;\">(b)\u00a0the election to be considered a Family Company has to be made within 3 months of the incorporation of the Company.<\/p>\n<\/div>\n<div style=\"text-align: left;\"><\/div>\n<div style=\"text-align: left;\">Under the tax regulations, the income of such a company is attributed to one (and only one) of the shareholders, and included on their tax return. By default, this is the largest shareholder, but any shareholder may be chosen for this purposes. This shareholder is known as the \u201crepresentative\u201d.<\/div>\n<div style=\"text-align: left;\"><\/div>\n<div>\n<p style=\"text-align: left;\">The business income of the Company is treated as unearned income in the hands of the representative, and taxed accordingly (starting at 31%). Other, passive income, is treated in the same way as if the assets were held\u00a0by the shareholder directly. For example, if the income of the Company is from interest, the income would be taxed at 25%. If there is a loss in the company, the representative can use them in the same way as if they\u2019d been his\/her own personal losses (see\u00a0<a href=\"http:\/\/taxinisrael.blogspot.co.il\/2014\/05\/losses.html\" target=\"_blank\" rel=\"noopener\">here<\/a>\u00a0for more)<\/p>\n<p style=\"text-align: left;\">For Bituach Leumi purposes, the income is divided between the shareholders in accordance with their percentage holdings, and taxed as unearned income accordingly.<\/p>\n<p style=\"text-align: left;\">The upshot of this is that when monies are distributed by the company, there is no tax on the \u201cdividend\u201d paid. The (potential) downside is that the company cannot defer taxes by not distributing profits, as\u00a0a regular company may choose to do.<\/p>\n<p style=\"text-align: left;\">There are of course further nuances to this law, and expert advice should be sought if you are thinking of going down this route. It should be noted that it is fairly simple to cease the company being treated as a Family Company. However, be aware that once the company becomes a regular company, it cannot become a Family Company again.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>In regular circumstances, a company is treated as a seperate entity for tax purposes; in much the same way that it is treated separately for legal purposes. However, there is the option \u2013 under certain circumstances \u2013 for the income to be taxed directly in the hands of the shareholder. The first of these cases [&hellip;]<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[200,253],"tags":[],"class_list":["post-8611","post","type-post","status-publish","format-standard","hentry","category-israeli-taxation-en","category-binyamin-radomsky-en"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.2 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The \u201cFamily Company\u201d - \u05d0\u05d1\u05d5\u05dc\u05e2\u05e4\u05d9\u05d4 \u05e8\u05d5\u05d0\u05d9 \u05d7\u05e9\u05d1\u05d5\u05df<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/aboulafia.co.il\/en\/binyamin-radomsky-en\/the-family-company\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The \u201cFamily Company\u201d - \u05d0\u05d1\u05d5\u05dc\u05e2\u05e4\u05d9\u05d4 \u05e8\u05d5\u05d0\u05d9 \u05d7\u05e9\u05d1\u05d5\u05df\" \/>\n<meta property=\"og:description\" content=\"In regular circumstances, a company is treated as a seperate entity for tax purposes; in much the same way that it is treated separately for legal purposes. However, there is the option \u2013 under certain circumstances \u2013 for the income to be taxed directly in the hands of the shareholder. 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