An end to the management of invoices and advance payments:
the Ministry of Finance in cooperation with the Tax Authority is planning a reform that will save cumbersome dealing with income tax reports and save time and money.
The reform is expected to be included in the upcoming Arrangements Law and it establishes a series of regulatory reliefs for dealers whose business turnover does not exceed the ceiling of an exempt dealer, approximately NIS 100 thousand per year.
According to the reform, these businesses will only be required to open a file, coordinate tax and pay tax at the end of the year.
They will be able to perform the operations with the help of a dedicated and user-friendly application.
That is, the small traders will have to submit a report only once a year instead of reporting every two months and paying advances, and submitting a cumbersome annual report.
The Tax Authority will allow a uniform deduction of expenses (for illustration), photo: Yehoshua Yosef
Beyond that, as a replacement for the existing rules for recognizing expenses, expenses were added at a normative rate of 20%.
This is in contrast to the current situation where the small businesses have to manage their list of expenses, manage the books and collect receipts.
Instead, the tax authority will allow a uniform deduction of expenses at the level of 20%.
For example, if it is an income of NIS 80,000, this amount will be reduced by 20%, which is NIS 16,000, and the tax to be paid will be on NIS 64,000.
The proposal is expected to directly save businesses about NIS 1.3 billion per year and over a million working days of dealing with bureaucracy and filling out reports.
Beginning to promote his economic agenda, Finance Minister Smotrich (archive), photo: Oren Ben Hakon
This is an initiative among the first of its kind in the world that corresponds with the agenda of Finance Minister Smotrich, who supports the removal of bureaucratic barriers in the business world.
However, it should be noted that the work on the reform already started about two years ago.
If the state budget passes as planned by the summer, the reliefs are expected to go into effect from the beginning of next year.
The new platform for small business reports will be established on the Tax Authority's website, and it will be based on the tax coordination system that already exists today.
The current income tax regulation does not distinguish between small businesses and larger businesses, as a result, a bureaucratic excess is created and burdens small businesses that have to pay advances once every two months, manage an income tax file, and more.
The tax regulation on these businesses includes, among other things, starting a business, registering and tracking expenses, reporting advances, filling out a full annual report, including attaching appendices and documents, and filling out a capital statement.
The regulation that exists today applies to about 400,000 existing small dealers and about 60,000 new dealers are expected every year.
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