The coronavirus is showing little sign of letting go. If only the Red Sea could open up for us all and engulf the pandemic. In the meantime, the Israeli government is continuing with (limited) economic assistance, here is the latest.
Personal grants of NIS 750:
By now, Israeli residents should have started receiving the much vaunted personal grants, as the Knesset passed the law on July 29. The National Insurance Institute is applying its database to transfer the money directly to people’s bank accounts. How much do you get? There are several components. First, every adult Israeli resident is supposed to receive NIS 750. Second, another NIS 750 is payable to certain needy people, including certain Olim in their first 12 months and certain returnees in their first 3 months back in Israel. Third, NIS 500 is payable for each of your first four children, NIS 300 per child from the fifth onwards. But, none of these grants are payable if your total annual income in 2018 exceeded NIS 641,880. If you do receive the grants, they are tax free!
Grants for business latest:
The Israeli Tax Authority’s website started accepting applications for so-called “fixed cost participation” grants for self-employed individuals (freelancers). The grants range from NIS 3,000 – 6,000 which may help you survive, but probably won’t cover all your costs.
As for companies, the grant amounts will range up to NIS 15,000 every two months but not right away, the ITA website is not yet ready to accept applications. A further announcement is expected.
Are corona grants taxed?
Some are, some aren’t. The NIS 750 grant is tax free. The other business grants are generally liable to income tax not VAT.
Businesses must include grants received in their annual income tax returns. They don’t need to issue invoices to the government but they must issue a receipt made out to the Israeli Tax Authority.
And the fixed cost participation grants are subject to national insurance (Bituach Leumi), but other business grants generally aren’t.
The business grants are not part of your revenues for purposes of calculating tax installments (mikdamot), they only get taxed after the end of the year.
Investment home purchase tax reduction:
In the past, in an effort to stem house price inflation, the rates of purchase tax (Mas Recisha) were sharply increased to 8%-10% for purchasers who were owners of more than one home. Now, that construction is considered an essential economic activity, purchase tax for such persons has just been scaled back again. Consequently, someone with more than one home buying a home in Israel will pay purchase tax at rates of “only” 5%-7% on homes costing up to NIS 5,338,290. The purchase tax on an only home is unchanged. Land appreciation tax for the seller of a home in Israel is likewise unchanged.
How to Not Pay Tax Yet:
If business revenues are down due to coronavirus, you can now request by September 29 a refund of tax installments (Mikdamot) paid regarding January and February this year, under a new law (Economic Assistance Law (Novel Coronavirus)(Ad Hoc Provisions) 2020). You can also, of course, also apply to reduce current monthly tax installments.
And if you are an employer that furloughed employees, you can postpone until October 15 payment of employers’ national insurance contributions regarding April-August 2020.
What about welfare societies?
The government announced on July 15 one-time grants for welfare organizations and charities with annual revenues up to NIS 20 million which provide social services, but are affected by corona and are not receiving other government assistance. The grants range from NIS 10,000 to NIS 400,000 according to detailed rules here: https://www.socialrelieffund.org/. But hurry, these grants were announced on July 15, and the closing date for applications is this Sunday, August 9!.
What is happening to the State budget? A cautionary tale
The State budget is caught up in coalition politics. Will there be a State budget for one year or two? All we know is that in the period 1996-1999, Israel was embroiled in successive coalition crises, and fiscal and economic measures were stalled endlessly. Consequently, the Prime Minister of the time (and now), Mr Benjamin Netanyahu lost the 1999 election to Mr Ehud Barak who won a landslide victory….It seems people want stability.