Operation Protective Edge was launched by the IDF on July 8 in response to missile and tunnel attacks on Israel, which are ongoing.

An earlier article reviewed compensation available from the Israeli government for property damage caused by enemy action. What about loss of earnings? On July 28, Finance Minister Yair Lapid signed proposed regulations enabling the payment of compensation for so-called “indirect damage” to businesses in the South within 40 kilometers from the Gaza Strip following Operation Protective Edge. This will be for the period July 8 to August 31, unless hostilities cease sooner.

The proposed regulations still require ratification by the Knesset Finance Committee and may yet undergo change, as discussed below.

What is expected?


A precondition for compensation will be continued payment of salaries to employees who don’t show up due to the security situation, in accordance with IDF Home Front Command directives to close educational facilities. Three “green channels” for compensation will be offered to businesses within the 40-km. range.

• First, the salary channel: claim reimbursement for salaries paid regarding periods of absence due to Home Front Command orders, or to look after children below the age of 14 or people with disabilities • Second, the revenue channel: claim compensation for reduced revenues (sales) compared with revenues reported for VAT purposes in the parallel period last year.

• Third, the expense channel: compensation of up to NIS 3 million for additional costs incurred to sustain revenues.

There will also be a “red channel” for businesses within 7 km. from Gaza that can claim proven loss of profits according to the nature of their business.

In addition, there will be compensation of up to NIS 3m. for special channels tailored to certain sectors, such as hotels, function halls and agriculture (e.g., for canceled bookings)

Comments

“We are making an economic Iron Dome for residents of the South,” Lapid said. Others said the compensation should be available to affected businesses across Israel, just like the real Iron Dome.

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

leon@hcat.co Leon Harris is a certified public accountant and tax specialist at Harris Consulting & Tax Ltd.

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