Submitting annual reports and returns

Our office specializes in account auditing and continued assistance of our business and individual clients. In addition, we provide additional professional services. These services include, financial analysis and advice; costing and budgeting systems, business purchase assistance, cash flow planning, income tax advice and internal control formulation.

Who is required to file an annual return?

Any person with income producing activities, as defined by law, is required to file an annual return of income tax. This includes individuals, business and not-for-profit organizations. Citizens living abroad who receive income taxable by Israel law are also required to file an annual tax return. The Israel tax authority has the right to demand from any Israel resident to file an annual return, even if the filer is an employee r unemployed.

What must the annual tax return include?

1. Taxpayers maintaining accounting records on a cash basis (“one-sided” - חד צידית), must file a return detailing all sources of income and expense involved in the business activity, as evidenced by adequate documentation. If the activity includes capitalized assets, the taxpayer must submit Form 11 detailing out all permanent fixtures of the business activity. If the taxpayer deducts automobile expenses, he is required to submit a separate report for each automobile. Additionally, the taxpayer must submit source documents regarding deposits to a “Hishtalmut” account, loss of work capability, allowances, payments to National Insurance (Bituach LeUmi), and the like.
2. Taxpayers maintaining accounting records on an accrual basis (“double” - כפולה), must file an annual statement of financial position (balance sheet) as of Dec. 31st, prepared in accordance with generally accepted accounting principles (GAAP).
   A corporation must attach an audited reconciliation of book income to taxable income.

Cash basis filers must include a Statement of Profit and Loss (income statement) for the taxable period. Accrual basis filers must include a Statement of Financial Position (balance sheet) in addition to the Statement of Profit and Loss.

פטור מהגשת דו"ח שנתי

The tax law and regulations provide exemption from filing the annual return to taxpayers who sole source of income is from employment, or from employment and allowances up to an annual 638,000 ₪ ceiling, provided that the taxpayer does not have a controlling interest in a corporation of 10% or more. Taxpayers who have a 10% or more controlling interest in a corporation must file an annual return regardless of the taxpayer’s level of income received from wages (even if it is lower than 638,000 ₪).

Additionally, investment income such as interest and dividends of marketable securities or interest on deposits in accordance with paragraph 122 in which applicable taxes are withheld and paid to the tax authorities at the transaction source, is exempt from an annual filing.

Deadline for filing the annual return

For cash basis filers, the annual return of income is due by April 30 following the close of the taxable year. Accrual basis filers must file by May 31 following the close of the taxable year.

Our cash basis clients benefit from an extended time to file until September 30 following the close of the taxable year. Our accrual based clients may file up to February 28 of the second year following the close of the taxable year.