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April 3, 2020 Israel defers periods for certain tax procedures in response to COVID-19; additional tax relief published On 27 March 2020, the Israeli Government approved emergency regulations (the Regulations) that define the period between 22 March to 31 May 2020 (the Defined Period) as a period that will not be taken into account for the periods under the relevant tax sections listed in the Regulations (income tax, withholding tax, value-added tax and others), if the end of such periods falls within the Defined Period or two months thereafter. It is noted that most of the listed sections are relevant for decisions and announcements that should be made by the Israeli Tax Authority (ITA) rather than by the taxpayer. The following is a non-exhaustive list of the main income tax and withholding tax (WHT) procedures that have been postponed by the Regulations:
The following is a non-exhaustive list of the main value-added tax (VAT) procedures that have been postponed by the Regulations:
The Regulations also refer to other tax laws, such as the Customs Ordinance, the Real Estate Tax Law, the Capital Investment Encouragement Law, and others. It is noted that the Defined Period also defers the 90-day period following a tax year in which innovative companies can apply to the Israeli Innovation Authority in order to qualify for the Israeli IP box regime, if they establish an innovation level that is similar to or higher than the innovation level that is acceptable worldwide in the main technological field of the company. Other tax measures and relief ITA approval on stock-based compensation deposits with a trustee under Section 102 of the ITO. Whereas in order to be eligible for the capital gains tax track under Section 102, it is required, among others, to deposit the signed grant letters with a trustee within 90 days, the ITA approved a relief that allows that deferral of such deposit until 1 May 2020 (where on that date, the ITA may re-examine the economic developments and update the deferred period accordingly). It should be emphasized, however, that the Board of Directors’ decision approving the grants and the grants detailed database are required to be deposited on time, as required in the ITA guidance. Input VAT offset relief. In general, a VAT dealer is entitled to offset input VAT only when he has an original or digitally signed tax invoice produced in accordance with the relevant bookkeeping rules. In light of the COVID-19 crisis and the existing restrictions on businesses, the VAT authorities published a lenient VAT ruling (no. 6782/20), which allows a supplier to send a copy of a scanned tax invoice by e-mail, without a digital signature, whereas at the same time, he will send the original copy of the tax invoice as a hard copy. The tax invoice recipient will record the said invoice in his bookkeeping records and may offset the input VAT based on the invoice sent by e-mail without a digital signature. Additional conditions are listed in the ruling. Relief for Grants-Track Enterprises (for manufacturing equipment, buildings and fixed assets). The Investment Authority of the Ministry of Economy and Industry has issued a procedure that stipulates administrative relief for investment programs under the Grants-Track. The following are the main leniencies included:
Other leniencies are included in the procedure. _________________________________________________ For additional information with respect to this Alert, please contact the following: EY Israel, Tel Aviv
Ernst & Young LLP (United States), Israel Tax Desk, New York
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