In some countries, such as the US or UK, virtually everyone has to file an annual tax return. Here in Israel, to make things easier for some, not everybody has to do so. Here is an overview of the requirements for the 2007 tax year, namely the year that ended December 31, 2007. When is the filing deadline for the 2007 tax return? The general deadline for individuals for filing the annual tax return has been extended from April 30 to May 29, 2008 due to Passover. For businesses required to keep double entry books the deadline is May 31, 2008. Additional time extensions can be requested from the Israeli tax authority if you have a good reason. Alternatively, most accounting firms are allowed to spread out the filing of their clients' tax returns over a longer period, without providing reasons, according to a special arrangement between the Israeli Tax Authority and the Institute of Certified Public Accountants in Israel. Who has to file a tax return? The rules are complex. In principle, Israeli resident individuals over 18 must file a tax return unless they are eligible for a filing exemption. Resident individuals may, therefore, be EXEMPT from filing a tax return if tax was paid - but only if a number of conditions are met. The basic guidelines are summarized below. Salary income may fall within the filing exemption if it did not exceed NIS 552,000 in 2007 (for each spouse). Rental income may fall within the filing exemption if it was from renting out residential accommodation in Israel if it did not exceed NIS 287,000 in 2007 (for each spouse). Similar exemptions apply to income from interest, securities, and pension incomes. What about foreign income? Foreign income may fall within the filing exemption if it did not exceed NIS 287,000 in 2007 (for each spouse). However, for such foreign income which is not from a sale of publicly traded securities of Israeli companies or foreign securities, a filing exemption may apply if tax was paid on account or if an exemption applies. For example, new and returning residents enjoy a five-year exemption for foreign source dividends, interest, rent and royalties and a 10-year exemption for foreign capital gains, for income and gains from pre-arrival assets. Foreign pension income may fall within the filing exemption if any tax due has been paid and it did not exceed NIS 287,000 in 2007 (for each spouse). Do children have to file an Israeli tax return? Israeli resident children who were under 18 at the beginning of 2007 must file an annual tax return if they had taxable income of NIS 59,900 or more in the year. When do foreign residents have to file an Israeli tax return? In principle, foreign resident individuals who derived taxable Israeli source income in the year must file an annual Israeli tax return. However, they may be EXEMPT from filing a tax return if the required tax was withheld and the income is one of the following: a business or profession conducted in Israel for no more than 180 days in the year; salary; pension; annuity; interest; dividend; rent; royalties. In practice, the Israeli banks are required to withhold tax from most payments to foreign residents at rates of up to 25%-29%. It is necessary to apply upfront to the Israeli employer's tax office to apply any more beneficial provisions in a bilateral tax treaty or the domestic Israel law. No tax is withheld on "patach" foreign currency bank deposits at the Israeli banks if the appropriate bank forms are filled out when remitting funds to Israel. Which companies have to file tax returns? Briefly, any entity that has income that is taxable in Israel must file an annual Israeli tax return, accompanied by audited financial statements. As always, consult experienced tax advisors in each country at an early stage in specific cases. [email protected] Leon Harris is an International Tax Partner at Ernst & Young Israel.