Tax Authority hardens positions: Any invoice over NIS 5,000 will be charged in reporting at the time of the transaction

As part of the Fictitious Invoice Warfare Commission, it was decided to recommend a significant reduction in the amount from which businesses will be required to immediately report to the Authority • Accounting software companies have already been notified to make the necessary change • Accountants and opposing tax advisers: "The model is not applicable

The tax authority's war on black capital and fictitious invoices is rising. "Globes" has learned that as part of a plan prepared by the Tax Authority for the next Treasury, any business owner who issues an invoice in excess of 5,000 will need immediate online approval at the time of the transaction from the Tax Authority. If you do not receive an invoice, you will not be able to offset VAT in the garden.

The purpose of the tax authority is to be present in business transfers and to avoid fictitious invoices. The new requirements will apply to all businesses in the country. It is estimated that 15% of invoices in the economy are NIS 5,000 or more. This is actually the adoption of the "Chilean model" to combat the fictitious invoices, which includes a direct link between the tax authority and real-time business, in every transaction and transaction.

The idea of ​​adopting the Chilean model had already emerged during Moshe Asher's tenure as a tax authority four years ago, but he was forgotten for a long time after not receiving much support. Recently, tax director Eran Jacob decided to shake the dust off the idea and make it real. About a year ago, Ya'akov established a team to fight the fictitious invoices, defined by him and by the tax authority as a "state blow" that draws hundreds of millions of shekels a year from the Treasury.

The team, called the "Tax Commission on the Tax Allocation Model in the Tax Authority," leads Miri Savion, the deputy director of the tax authority. The first suggestion on the table was that any company making a transaction for more than NIS 50,000 would have to contact the tax office's VAT office and ask for an invoice. The tax authority will examine every invoice sent to it using a list of suspicious signs. Confidential and cross-checking data against various computer repositories - and approve or reject it. Due to an invoice that will be rejected, VAT cannot be offset.

Months went by, and meanwhile, the committee members came up with a more revolutionary idea: lowering the required number of transactions to NIS 5,000 instead of NIS 50,000. The model is expected to apply to the entire Israeli economy, with the aim of fighting the fictitious invoices.
Who will fund the extra costs

"Globes" learned that the Tax Authority recently turned to computerized account management software manufacturers in an "advance notice" that made it clear that they needed to prepare for the process. In the petition, titled "Preparing for Accounting Software Changes Following the Continued Reporting Development and Implementing Section 47 (a) of the VAT Law," the Software Owners Authority states that in order to continue providing services to businesses, they will be required to comply technologically and align with the new directive. Internal Revenue Service.

In a letter to the software manufacturers, the tax authority states that "by the planned 2020 tax year, it will be mandatory to implement the changes related to the production of such tax invoices, in accordance with the directives issued by the tax authority."

Another appeal was made to members of the National Cyber ​​Arrangement to make their views known on its move, feasibility and potential risks.

The tax authority's appeal to the accounting software owners is far-reaching. For example, will the upgrade costs of the systems be rolled on, and if so, who. Another question that arises is, what will happen when the representatives of business, account managers and tax consultants will have to report to the tax authority on each invoice of this magnitude. It is already clear that such a move would result in additional working hours for the accountants, to whom naturally, higher fees will be required from the representatives.

And so, while the last government has repeatedly talked about lowering regulation and bureaucracy for business, the tax authority is formulating the opposite idea that the entire business is regulating businesses, while at the same time placing additional expenditure on them.

The new idea was met with quite a bit of criticism. "Globes" Eran Jacob, director of the tax authority, says: "The tax authority has a strategic plan, with the goal of moving to a preventive world, rather than a world of enforcement. The problem must be avoided in advance. The online VAT model reduced the fictitious invoices and was correct At the time, but today it no longer fully addresses the problem that draws many billions from the state coffers.

"With the right preventive measure, we can easily bring NIS 5-6 billion into the state coffers. The economy is always resisting changes. It also happened when the online reporting came into the VAT, and everyone shouted that the economy would collapse, but it did not collapse and vice versa - we are one of the most advanced in the world in this area - but it is Not enough. We must find the overall, preventive solution to the fictitious invoicing problem, and we are currently in the midst of the subject learning process and developing a program that will solve the problem. "

Another question that arises from the tax authority's "NIS 5,000" model is what will prevent businesses from manipulating invoices - for example, splitting invoices into lower amounts, or making transactions at NIS 4,999.
"Paralysis of all activity in the economy"

In light of these problems, the tax advisers' president, tax advisor Yaron Gindi, contacted the tax administration's deputy director Miri Savyon, and the tax director himself Eran Yaakov, in a new proposal: eliminating the total amount of transactions, and prompt online reporting of every transaction between business dealers, through Dedicated app or site.

According to this model, invoices are not required by the tax authority. Through the online and immediate reporting of all transactions, the tax authority will establish a huge invoice pool, which includes all transactions reported in the economy, which will allow it to cross data between the invoices of those dealers, and ensure that there is a correlation between buying and selling.

According to Gindi, "This is a model that lowers business costs and reduces regulation. Every state of Israel, whether pedicuresite or gardener, can issue invoices via their mobile today. All my clients issue invoices through their mobile. According to our proposal, every business invoice will be delivered to the tax authority on - By the owner of the business, regardless of the amount of the transaction. At the end of each month the representatives will withdraw all the data sent to the authority and fill out the VAT report. No one will have to save invoices anymore, collect data and type them into authority forms. "

According to Gindi, "The model we have proposed will provide a more comprehensive and effective response to the fight against fictitious invoices and black capital."

Accountant Iris Stark, president of the Institute of Certified Public Accountants, also opposes the model proposed by the tax authority and acts to block it before the legislation is formulated. According to Stark, "the proposed model is problematic, inapplicable and could severely impair all activity in the economy - dealers, financial institutions. And nonprofits.

Stark says, "There is a surplus of bureaucracy here, and this is also the case when it will entail crazy costs of unknown software and also a very big fear of data leakage and cyber risks, which will particularly hurt the security industries. "It's too early, and for cost-benefit reasons, it has no justification, so alternative solutions need to be concentrated on the problematic industries."

Among the alternative solutions that Stark offers are: Spotlight on the workforce and contracting industry, collaboration with the Registrar of Companies, and blocking licensed dealers who exchange "identity" in the first few months of operation.

The tax authority said in response: "As part of the tax authority's struggle with the fictitious invoices phenomenon, the authority decided on an innovative model for combating this phenomenon, a model that combines technology and vision. The tax authority has examined various reporting methods in the world and concluded that in today's technological age, steps must be taken to move forward .

"The ISA is making the best efforts so that no additional burden is placed on the public as a result of the implementation of the model. The CPA's alternative solutions have been tried in the past and it has become clear that the delinquent public is quickly learning the PA and avoiding such or other point treatments. For example, by registering another branch of the field of practice. Dealer ('under the radar' branch), sophisticated identity exchange and more. "

The Tax Authority said in response: "As part of the tax authority's struggle with the phenomenon of fictitious invoices that, as is known, damage to billions of shekels a year to the state treasury, the authority decided on an innovative model for combating this phenomenon, a model that combines technology and vision.

The main points of the model are: First, the Tax Authority believes that preventive prevention must be avoided in connection with the phenomenon of fictitious invoices. Today's technological climate allows the use of methods that will prevent the phenomenon from occurring in advance. Early prevention is more effective than a late and often futile pursuit of offenders; Second - any tax invoice whose amount exceeds the threshold to be determined will be subject to approval of an assignment number. A tax invoice that you do not receive approval from will not be able to offset VAT for it. It should be emphasized that invoices issued to private individuals will not require an allocation number so that virtually all the retail sector, which has invoices and reports, is 'out of the game'; third - most invoices will be computerized, ie A dispatcher exiting the dealer's accounting software will answer a return mail that will include in the dealer's tax invoice the allocation number, meaning that the vast majority of invoices will not be typed but will automatically pass on receipt numbers and the burden on the dealership will be very small, if any.

"It will be made clear that the Authority is making the best efforts so that no additional burden is placed on the public as a result of the implementation of the model. The Tax Authority has examined various reporting methods in the world and has come to the conclusion that in today's technological age, steps must be taken to prevent counterterrorism.

"The Authority did not invent the wheel, but rather adopts the rationale for credit card companies that, in some extreme cases, delay transactions based on risk management models. When permitting those transactions requires something else from the parties to the transaction.

"Regarding the opposition of the bureaus - the authority is working with the bureaus to find solutions that will facilitate the public. Thus, for example, the authority is working on finding a technological solution that will also save the number of the allocation and in some cases all the invoice data itself. .

"As for the CPA's alternative solutions, these have been tried in the past, and it has become clear that the offender is quickly studying the PA and avoiding one or the other point treatments. For example, by listing another branch of the dealer's field of practice (which is generally 'under the radar'), Changing sophisticated identities and more. "
The fictitious invoices: a loophole worth billions

The use of fictitious invoices is perceived by the tax authority as a blow to the state. According to the estimates of the Authority, many billions are eliminated from the state coffers through this method - seen as a simple maiden method for implementation and relatively difficult to detect.

In this method, the recipient of the fictitious invoice uses it to reduce payments to the tax authority through periodic VAT deductions, as well as by increasing its expenses in the annual reports to the IRS.

The Authority's struggle with the phenomenon of fictitious invoices has in recent years led to the unveiling of professional networks for distributing fictitious invoices for hundreds of millions of shekels. At present, the duty of online VAT reporting does not include all dealers. For those who do not report online, invoices cannot be crossed between the invoice recipient and the invoice provider, thus creating an opening for tax evasion planning.

The model proposed by the tax authority - which includes reporting, checking and approving any transaction over NIS 5,000 - should reduce the fictitious invoices. The model was recently presented, among other things, to the Accountant's Office, the Tax Advisers' Bureau and the Bar Association, some of which expressed significant reservations, with the tax authority also intending to hold a meeting with Finance Committee MK Moshe Gaffney, to promote legislation to articulate the move Planned, once a new government is established.
The war on fictitious invoices - that's how the model works

Objective: Fight fictitious invoices through online invoicing and cross-referencing of taxpayers' suspicions of new invoices

The principle: When generating an invoice of over NIS 5,000, the business owner will be required to report the transaction to the tax authority, using accounting software or a dedicated website, and obtain approval

Who will apply the model: Only "business invoices" - transactions to be made between dealers, between a dealer and a financial institution and between a dealer and a non-profit

Information to be transmitted: Transaction date, invoice number, invoice recipient and invoice recipient number and invoice amount without VAT

Document Authentication: A web application will be built to enable the customer registered in the transaction to verify the invoice details received from the vendor

Detailed Reporting: The approval number will be reported by the dealer and the client. A mismatch between the confirmation number and the invoice details will invalidate the invoice