It's "after the hagim" again. So we have to rapidly get down to the serious business of filling out tax returns. Last year I'm afraid it proved highly difficult to get my clients to wake up, and I hope this year will be easier. Although I hope there will be extensions this year as in the past, and I will of course be taking advantage of them since it is not possible to do the year's work in a month, I am not in any way responsible for late fines levied on anybody who fails to provide me with all their material by the end of May. If anything is unclear, now is the time to ask! I am deliberately repeating myself in this letter in a desperate effort to get the message over.
Among the most problematic items has been getting certificates from banks in Israel and abroad regarding income from interest, dividends and capital transactions. PLEASE get these on track NOW. If you file a tax return overseas I really do have to have a copy. And if you are a pensioner here or abroad please let me have certificates of those pensions, government and private, without waiting for the last minute. I cannot get bituah leumi pension certificates on my computer so don't rely on this.
At time of writing I have seen absolutely no information about extensions for this year, which means that most personal tax returns become overdue quite soon. While I have no doubt that some sort of extension will be granted, there is no guarantee at all that it will be as generous as in the past. The earlier you bring your papers to me, the less chance there is that you will receive a late fine; you have been warned.
I want to re-emphasize that there is now complete co-operation between the tax authorities here and in the countries you arrived from. They know what is going on and it makes no sense to try to hide. You will be expected to sign a declaration in the attached or similar format, amended if necessary in accordance with circumstances, along with your report. You must report ALL income from all sources, earned or unearned, taxable or exempt, in Israel or abroad, no exceptions.
Please collect together the following original documents and information without delay. Married clients should include data regarding both spouses and children below 18 years of age at the end of 2005. Data is required both for taxable and exempt income. If you have income overseas you must include this whether or not it is earned from an occupation similar to that carried out in Israel or the proceeds are remitted directly to Israel (these changes have been in effect since 1.1.03). Capital gains on sale of assets (other than straight bank deposits) abroad after you have lived 10 years in Israel are in most cases subject to Israel capital gains tax (this is not new, just more likely to be policed than it used to be) – as in the case of other income, you may deduct from any Israel tax liability any income tax which you can prove you have paid on it abroad. "The tax rate for certain types of foreign income dropped significantly in 2005 and you may have little or no tax to pay on them but they must be reported.
IF YOU HAVE FILED OR INTEND TO FILE A TAX REPORT IN ANOTHER COUNTRY IT IS ESSENTIAL THAT I RECEIVE A COPY THEREOF AND/OR NAME, TIMEZONE AND TELEPHONE NUMBER OF YOUR FOREIGN TAX ADVISOR – PLEASE NOTIFY HIM TO EXPECT A CALL FROM ME AND REQUEST THAT HE PROVIDES ME ANY NECESSARY INFORMATION.
Some of the new demands (reprise from last year's letter):
- A yes/no answer to the statement “During the tax year I, my spouse &/or children under 18 possessed asset(s) abroad valued at NIS 1,554,000 or more”.
- A yes/no answer to the statement "During the tax year I established a trust, or received trust moneys exceeding NIS 100,000 or I benefit from trust moneys”. (If yes) Form 151 is attached hereto.
- Yes/no answers to the statements “I hold a controlling interest in a non resident corporation quoted on a foreign stock exchange” and “I possess rights in an unquoted non resident corporation”. If yes to either, I attach form 150.
- It is no longer possible to receive rebates to a bank account which is not in your name.
Changes in address (home or work), family size and aliya status or bank account particulars (including official name of account)
Forms 106 (including social benefits appendix) for salary income
Form 857 for amounts received from people who do not employ you but withhold tax from you
Receipts & Payments book and source documents for businesses where we do not maintain them
Certificate of amounts received from and paid to Bituah Leumi (National Insurance)
Pensions and severance pay
Amounts received for rent of property etc.
Income from interest, dividends and capital gains (including business vehicles) – include income on previously taxfree savings!
Income from royalties
Any other income
Original receipts for donations to charities recognized under s46 of the Israel tax law (also for memorials to victims of enemy action)
Inventory of stock at 31.12.05 and its cost (or value if lower)
VAT and advance Income Tax payment booklets where these are not held by us
Karnot Hishtalmut (training funds) other than as a salary earner
Kupot Gemel/Pensia (provident and pension funds) this year showing separately payments to "deficit pension funds"
Bituah Hayim (life assurance)
Recognised investments in research & development, oil exploration and movie production
Cost of maintaining a relative in an institution for health reasons (those with an incapacitated child should attach the relevant certificate)
Residence in preferred areas according to income tax regulations (note that there are no longer any of these in the Jerusalem and Central districts)
Recent release from sherut sadir (conscript service in the security forces)
Tax assessment or exemption on the sale of landed property
Recent immigrant – attach copy of immigrant’s certificate
Persons who maintain children who do not reside with them should specify this
Taxes paid on income &/or capital gains abroad – PLEASE attach receipts.
Hag kasher vesameah to all.
