Israeli corona economic package ambles

After much delay, the Israeli government is starting to implement an economic package for the Israeli business sector which is reeling from the corona crisis. Over 20% of the work force is unemployed or laid off, contributing to the business slump.

So what is planned?

Grants are planned up to NIS 4,000 for people aged 67 or more in April and May, in addition to state pensions. Comment: It is unclear whether this means one or two payments of NIS 4,000. Olim not receiving a state pension may be ineligible.

Under new emergency regulations just issued (April 2), grants may be paid to the self-employed (freelancers) of NIS 6,000 soon, with NIS 8,000 proposed for later.

There may be months exemption from municipal tax (arnona) for businesses regarding March-May.

There may be a refund of tax installments (mikdamot) paid regarding February-March in two tranches. Comment: the March tax installment is due mid-April – why pay it? What about VAT and payroll taxes?

State-backed loans of 8% of annual revenues will be available to large businesses with annual revenues of NIS 400 million or more.

For smaller business, the shareholders’ equity requirement for 5 year state-backed loans of up to NIS 500,000 (already available) is reduced from 10% to 5%. Comment: there has been criticism that financial institutions are turning down loan applications due to the need to decide rapidly!

Grants for the self-employed (freelancers):

Under the new emergency regulations a self-employed Israeli resident individual in business before March 2020 may receive a grant of 65% of his 2018 average business income.

If average business income in 2018 (or 2019 for new businesses) exceeded NIS 16,000 per month, the grant is reduced by 75% of the excess, i.e. no grant above NIS 24,000 per month.

Various conditions apply including the following.

•The individual must be aged over 20 at the end of 2019.

•Annual total income (before losses and capital gains) under NIS 240,000 in 2018.

•For a couple, annual total income under NIS 340,000 in 2018, with investment income split 50:50 between them.

•Monthly average business income at least NIS 2,000 in 2018.

•If the individual started in business in 2019, he will need to file a 2019 tax return and that will be used for calculation purposes.

•March-April 2020 revenues at least 25% less than in the same period in 2019.

•Filed a 2018 tax return.

•VAT returns filed up April 2020 (obviously not possible yet).

•The grant claim form must be filed within 70 days after March 2, 2020 the emergency regulations were issued i.e. by May 10. This means the April VAT return must be filed by then to.

•If the individual started in business in 2019, he will need to file a 2019 tax return and that will be used for calculation purposes.

Once the claim form is filed, the Israeli Tax Authority is required to wire the grant to the claimant’s bank account within 10 days - unless something requires correction…..

The grant will be liable to income tax (timing unclear) but not national insurance apparently. US citizens residing in Israel may presumably also face US income tax and social security on the grant – they should consult there is tax advisors.

What’s missing?

People operating through companies won’t get this grant, only unincorporated businesses. This is a major issue.

The new regulations do not yet cover the second grant announced of NIS 8,000…..

No general extension for filing and paying tax is yet proposed – anyone wanting an extension must apply on an individual basis to the Israeli Tax Authority.

New Work Place Regulations:

The government published amended work limitation regulations. They are in force until April 21 (unless extended or amended). Following is a brief summary:

No more than 10 people or 15% (previously 30%) of the work force, whichever is higher, can be present at a work place, but the employer may raise that to 30% if this is essential to activity and the Economic and Industry Ministry is notified here: https://govforms. gov.il/mw/forms/limited-hiring@moital.gov.il.

Peripheral employees not performing a core activity may not enter the work place unless their presence is essential and notified as above. A peripheral employee will usually be a clerk or a secretary.

Partial or full exceptions apply to certain essential bodies of a governmental nature and certain vital bodies. No notification is needed in such cases.

The employer must instruct employees to check their temperature before setting off to work and to fill in a declaration that they do not have virus symptoms

Comments:

Let’s hope all this works. Keep well!

As always, consult experienced tax advisers in each country at an early stage in specific cases.

The writer is a certified public accountant and tax specialist at Harris Horoviz Consulting & Tax Ltd. leon@h2cat. com