Business cash compensation:
On June 9, the Knesset Finance Committee approved financial compensation for businesses. This is on top of compensation for property damage (see below).
Businesses located up to 40 km. from the Gaza Strip may choose between a sales revenue-based package or a salary-based package. Businesses located between 40 and 80 km. from the Gaza Strip may only claim the salary-based package.
Salary based compensation of NIS 430 per lost work day may be claimable. In addition, the business may claim fixed cost participation grants similar to the conditions for coronavirus grants.
Compensation for reduced sales revenues will be capped at NIS 1.5 million.
Farmers may claim special compensation of NIS 4,031 per employee if they are located between 0 and seven km. from the Gaza Strip, NIS 3,225 per employee if they are located seven to 20 km. from the Gaza Strip and NIS 1,935 per employee if they are located between 20 and 40 km.
Kindergartens and child minding centers may claim NIS 430 per lost work day, provided parents were let off paying for those days.
Affected readers should evaluate what is best for them by reference to the final regulations.
Business accelerated depreciation for replacement business assets:
Businesses eligible for the above business cash compensation due to the Guardian of the Walls campaign may also claim accelerated depreciation for new equipment purchased to replace old equipment damaged in the hostilities. This is provided activity was stopped by the damage for at least seven days. The new equipment must be purchased within the period from May 10-December 31, 2021. The equipment must be put into service in Israel within six months after purchase.
The rate of accelerated depreciation in qualifying cases is 100% of the original price (generally the cost). This applies to equipment costing up to NIS 1 million. If you then sell the equipment to a related party within four years, the related party takes the equipment at a cost price of zero, presumably for both tax depreciation and capital gains tax purposes.
No accelerated depreciation is available if you buy the equipment from a related party or turn inventory originally held for sale into a fixed asset and in certain other cases.
Property cash compensation:
The above refers to loss of business earnings and depreciation on replacement business equipment. There is also ongoing government insurance for the public regarding property damage due to hostilities. The prescribed property damage compensation rates for hostilities in 2021 are as follows:
Furniture: NIS 26,620 per couple plus NIS 5,382 per child;
Clothes: NIS 10,932 per couple plus NIS 1,640 per child;
Electronic and electrical appliances: NIS 36,088 per couple plus NIS 604 per child;
Other household items: NIS 22,063 per couple plus NIS 2,022 per child.
You can pay to insure your household items to a higher value until December 31 of that year. The premium is 0.3% of additional value up to NIS 905,747 of additional value. You cannot extend the state insurance to cover art, jewelry, antiques or cash.
In the case of business damage, compensation is available for the cost (excluding VAT) of inventory and assessed market value of equipment if you can prove ownership.
Damage should be notified within 2 weeks, compensation should be claimed within 3 months at any tax office. Government valuers’ appraisals and other proof may be necessary.
Comment:
We wish readers all good health and rapid recovery from any injuries or damage they may have sustained.
As always, consult experienced advisers in each country at an early stage in specific cases.
leon@h2cat.com
The writer is a certified public accountant and tax specialist at Harris Horoviz Consulting & Tax Ltd.