2015 year-end tax planning

With the end of the tax year fast approaching, here are a few tips that may be relevant:

• If you haven't already done so, make a claim for the Working Tax Grant (negative income tax) in respect of 2014 income. The deadline is Friday 25th December.

• If you are a business with inventory, take a count as close as possible near the year-end. The cost of each item should be listed alongside the quantities.

• Business owners should make top-up payments towards pension, Keren hishtalmut etc to take advantage of the tax breaks available. The same goes for salaried individuals who have private pension plans.

• If you pay Bituach Leumi without usng a standing order, pay by the end of the year in order to receive the deduction for tax purposes. (Those paying on standing order will have the January payment included in the 2015 certificate)

• Make donations to recognized charities (section 46), and ensure the receipt is dated 2015.

• Start collating information for "short" tax returns, if relevant:
• Israeli property income taxed on the 10% route must be reported and the tax paid by 30 January 2016.
• Foreign property income taxes on the 15% route and foreign interest, dividends and/or capital gains must be reported and the tax paid by 30 April 2016.

• For business owners, consider whether you need to increase the amount you need to pay on account for both income tax and bituach Leumi. If you don't, expect to pay interest on the extra payments once the tax return is eventually filed. For Bituach Leumi, this will mean letting them know that you wish to increase by the end of the year. For income tax, voluntary payments can be made anytime. Interest is fully waived on payments made in January. 50% is waived on February payments and 25% is waived on March payments.

Information exchange

The latest amendment to the tax law was publicized last week. Among the sections included in the new law was a section dealing with the circumstances in which the Israeli Tax Authority is permitted to exchange information with other tax authorities across the world.

Without going into the details of the law, suffice to say that we can expect the flow of information to start in the relatively near future (likely 2017, 2018 onwards), and those who have hitherto unreported income – specifically in foreign countries – are ever-more likely to become exposed.

It goes without saying that a person coming forward to the tax authorities ahead of them getting a knock on the door in the middle of the night is in a far superior position. And so, I would urge anyone who has any concern that they have income not reported to the Israeli tax authority to do so, and do it soon.

If you are unsure if income needs to be reported, see the previous post regarding who needs to file a tax return.

Further, for those who have an issue, it is worthwhile considering entering the Voluntary Disclosure Procedure – see more details here.

Contact me today (details on the side of the blog) to discuss your personal circumstances and how best to "come clean."