Don’t pass over a coronavirus support grant

As we head toward the season of our freedom from bondage in Egypt, perhaps there is also freedom from coronavirus is in the offing. But in some sectors the price in lost earnings is heavy. What are the current grants for businesses from the government? The following is a brief update:

Social grants

Social grants of up to NIS 15,000 are paid every two months to freelancers and company main shareholders if revenues dropped at least 40% in the two month period reported on compared with a year earlier, and taxable income in 2018 or 2019 did not exceed NIS 651,600. The grants are assessable to income tax, not national insurance nor VAT.

Fixed cost participation grants

For freelancers, companies, partnerships and notfor-profit bodies, if annual revenues were up to NIS 300,000 but declined 25% in a bimonthly reporting period compared with a year earlier, bimonthly fixed cost participation grants of NIS 3,000-6,000 are possible.

If annual revenues were in the range NIS 300,000400 million but declined 25%-60% in a bimonthly reporting period compared with a year earlier, grants of NIS 6,000-500,000 are possible according to a formula.

These fixed cost participation grants are assessable to income tax and national insurance, not VAT.

(pegiah memuschet) assistance

If annual revenues did not exceed NIS 300,000 but declined 25%-60%, additional “ongoing impact grants” of up to NIS 9,000 are available,

If annual revenues were in the range NIS 300 thousand and the business received at least three bimonthly fixed asset participation grants, the ongoing impact grants may range up to NIS 50,000 according to a formula.

These grants are assessable to income tax and national insurance, not VAT.

Ongoing impact City tax (Arnona) discount

A city tax discount of up to 100% for recipients of fixed cost participation grants is possible if revenues have declined by 25%.

Job grants

Job creation grants are no longer available. Job preservation grants of up to NIS 5,000 per relevant employee in September-October 2020 can be claimed by June 30, based on a formula reflecting revenue decline, business size and the number of employees.

Claim deadlines

Various claim deadlines apply to each business grant – typically 3.5 months after the end of each bimonthly reporting period. And no claims are currently permitted after mid-June regarding periods up to the end of February. After that, new legislation will generally be needed.

Tax reporting

The Israeli Tax Authority pays most of the grants, but apparently lacks the authority to insert those numbers directly into taxpayers’ tax returns. Instead, the ITA is expected to provide the information to taxpayers who should then enter it themselves in their tax return.

If it turns out grants have been overpaid, based on reported results, the ITA is expected to add the difference to your tax bill. And if grants have been underpaid, the ITA is supposed to pay the balance of grants due. This is according to an announcement of the Israeli CPA Institute on March 18, based on Economic Program legislation passed by the Knesset the day before.

What about would-be employees?

The National Insurance Institute pays unemployment pay to employees aged under 67 who are dismissed or laid off without pay.

The NII also pays people back-to-work grants if they resume work in the period November 2020-April 2021. You can return to the same employer or work a different one. You may even make more in total than unemployment pay. The grants can continue for up to four months, but not after July 31. The monthly grant amount can range up to NIS 5,200.

For example, you used to have gross pay of NIS 10,000. Your unemployment pay was NIS 5,970 per month. You go back to work for NIS 7,000 per month (30% less than before). The monthly grant may be 30% of the unemployment pay paid to you, i.e. NIS 1,791. Total monthly gross income is now NIS 8,791 (=7,000 + 1.791). This figure of NIS 8,791 is less than the maximum salary plus grant of NIS 16,432.

Furthermore, anyone going back to work in February-April 2020 may receive a supplementary grant of NIS 1,500 or NIS 3,000. This is conditional on the person being unemployed between September 24, 2020, and January 31 and receiving 130 days unemployment pay in the period March 1, 2020, and March 3. For other detailed rules see the NII website in Hebrew or English.

Wishing all our readers a Happy Passover.

As always, consult experienced accountants/advisers in each country at an early stage in specific cases. leon@h2cat.com