Your Taxes: Dealing with the corona economic crisis

The Finance Ministry has set up a new state-backed loan facility for small and medium-sized businesses facing cash-flow issues due to the coronavirus outbreak.

An accountant calculator taxes 370 (photo credit: Ivan Alvarado / Reuters)
An accountant calculator taxes 370
(photo credit: Ivan Alvarado / Reuters)
The coronavirus is causing difficulties, and the Israeli government has begun announcing measures of an economic and fiscal nature. Here is a short overview:

Delayed deadlines
The deadline for filing monthly VAT returns has been extended to March 26 and for filing bimonthly VAT returns to March 27.
Other current periodic deadlines have not (yet) been extended. 
Nevertheless, if your revenues have decreased, your income-tax installments (usually a percentage of revenues) may likewise decrease. And… some employers are laying off employees (see below).
Withholding certificates of businesses and others (e.g., some landlords) that were due to expire on March 31 are extended to April 30.

Government-backed loans
The Finance Ministry has set up a new state-backed loan facility for small and medium-sized businesses facing cash-flow issues due to the coronavirus outbreak.
The main terms are:
Loans of up to NIS 500,000 or 8% of last year’s revenue  – whichever is higher!
Collateral of 10% needed – the State provides the rest;
five-year term;
Grace period of up to six months before repayments begin;
Exemption from the usual fee of NIS 250.

Applications should be accompanied by: Declaration signed before a lawyer spelling out the link between cash-flow needs and the virus;
Monthly profit and loss forecast for the upcoming year.
The applications are initially processed by one of two private firms: Giza Singer Even or BDSK. Thereafter, the loans are administered by certain major Israeli banks.
The time needed to deal with a loan application will be expedited as far as possible. The Finance Ministry claims that the handling and checking process at the bank selected may be as short as nine working days.

For further information.

Unemployment pay for laid-off employees
Unemployment pay is available for employees laid off on unpaid leave due to the coronavirus. For details and online registration: https://www.btl.gov.il/benefits/Unemployment/Pages/SohenNesiaot.aspx.
The employee should receive the unemployment pay from the first day off and won’t have to first use up vacation pay.
If you register online by March 26, this may be backdated to March 15.
You must obtain Form Bet Lamed/1514 from your employer, indicating the starting date of unpaid leave and expected period of leave.
You may need to report regularly (online at present) that you are still laid off.

Other conditions
You are an Israeli resident or permanent resident aged 20 to 67. You need to have worked 12 months in the last 18 months. The following are generally ineligible: self-employed, major shareholders in private companies and members of a kibbutz or moshav shitufi.
 
How much is unemployment pay?
Unemployment pay is calculated on a daily basis as a percentage of your pay in the last six complete months before you apply. For example, someone aged at least 28 who was earning NIS 7,000 per month may receive unemployment pay of NIS 4,800 for a complete month of 25 working days. Someone who was earning NIS 15,000 per month may receive unemployment pay of NIS 7,470 per complete month. The maximum unemployment pay is NIS 10,551 for someone who earned NIS 25,275 per month. Lower rates apply to someone aged under 28, e.g., NIS 3,660 per month unemployment pay if earnings were NIS 7,000 per month. After 125 days, the unemployment pay reduces to a maximum of NIS 281.36 per day. These payments are taxed.

What about the self-employed (freelancers)?
The government has announced a grant of NIS 6,000 for freelancers; details are being formulated. Freelancers may also be able to dip into their pension plans.
Certain teachers, sport trainers and tour guides may be able to claim unemployment pay. They would need to have worked for 12 of the last 18 months under contracts of at least three months or contracts to provide seven lessons or lectures or training sessions.
 
Dismissal?
Employees who are dismissed by their employers for any reason may generally be entitled to severance pay at the rate of one month per year of service after the first 11 months. That equates to one-twelth of your latest paycheck or 8.33%. Of this, in many cases 6% will already have been paid into your pension fund (kupat gemel) by the employer. All this would need checking out with your insurance agent and/or labor lawyer. Employers should perform similar checks.

Comments
Things are dynamic at present. The government is recommending that people work from home where possible. Video conferencing is becoming the norm. Government websites are under strain and not always available. But Israelis are renowned for improvising and coping. And e-commerce is sure to expand.
The above is general and preliminary. Consult professional advisors, the National Insurance Institute and the Employment Service in specific cases.

leon@h2cat.com
The writer is a certified public accountant and tax specialist at Harris Horoviz Consulting & Tax Ltd.


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