Your Taxes: Online VAT reporting offers respite

Good news for some small and medium-sized Israeli businesses and various charities.

iPad Apple tech 311 (photo credit: AP)
iPad Apple tech 311
(photo credit: AP)
Israel embarked on a major gradual reform of VAT procedures this year. The aim is to curtail VAT fraud involving fictitious tax invoices. Consequently, businesses with annual revenues exceeding NIS 4 million in 2009 must now file detailed VAT returns listing all sales and purchase invoices, as well as import documents, on VAT returns filed online, commencing with the January 2010 VAT return.
The Israel Tax Authority on May 26 announced a postponement for businesses that have: (1) annual revenues exceeding NIS 1m.; or (2) are required to keep double-entry books (with debits and credits) under the bookkeeping regulations.
Originally the deadline for them to file online returns listing sales and purchases was January 1, 2011.The bookkeeping requirements vary from sector to sector. You should consult your accountant if you are in doubt.
Understandings have been reached between the ITA and a body known as the Online Reporting Compliance Forum.
These understandings have resulted in a postponement of online reporting to the beginning of 2012. But this ONLY applies to: (1) taxpayers who are allowed to keep books under the single-entry method; (2) nonprofit organizations with at least 300 employees; and (3) financial institutions. This is good news for some small- and medium-sized Israeli businesses and various charities.
Nevertheless, businesses that are required to keep double entry books must use online VAT reporting by the beginning of 2011, if they didn’t already this year. That covers many firms in Israel. Any remaining businesses will need to use online VAT reporting in 2012.
To file online, you need a special smart card enabling an electronic signature. So start applying for one soon if you fall into one of the above categories required to do so in 2011.
If you have any questions, you can contact a help line at the ITA: telephone *4954 or (02) 565-6400. Or else send them an e-mail: mokedreshut@
As always, consult experienced tax advisors in each country at an early stage in specific cases.
Leon Harris is an international tax specialist at Harris Consulting & Tax Ltd.