Business Management and Continuity in these Challenging Times
In light of recent events and the IDF’s operation, we have gathered relevant information which pertains to the security and economic situation in Israel.
We are here to help.
General Information
- ITA: report filing reliefs, extensions and deferral of debt foreclosure
No new foreclosures will be imposed and no debt execution and foreclosure proceedings will be implemented until October 20, 2023. This date will be updated as necessary. Interest and linkage differences will apply as required by law. Please note that no current foreclosures will be lifted and no debts will be waived but only the relevant proceedings will be suspended. Applications can be submitted by legal representatives to the ITA’s Public Inquiries System – PIS. Special applications can be filed by representatives who have been drafted to army reserve duty in addition to the PIS also via email to the ITA’s collection office at haravot-barzel-veahifa@taxes.gov.il.
The Committee approved the second and third readings of the revised law for deferring reporting dates amended following the ICPAS request as follows:
- Statute of limitation of filing tax returns for the 2022 tax year – as an exception and in view of the effect of the ongoing war on the headcount in the offices of the representatives and taxpayers, tax returns for the 2022 tax year filed by January 31, 2024 will be viewed as filed on December 31, 2023 for the purpose of statute of limitation (provided that the taxpayer’s mandatory tax returns for the 2020 and 2021 tax years had been filed by the end of the year following the reported tax year, for example, the tax return for the 2021 tax year had been filed by December 31, 2022).
- Deferral of charge dates as per Section 3(i1) – the charge date of debit balances as per Section 3(i1) accumulated by the end of 2022 will be deferred by three months, allowing taxpayers to repay withdrawn debit balances that were due on December 31, 2023 until March 31, 2024. It should be noted that if the debit balances are not repaid by said date, the charge date (including interest and linkage differences) will be the original charge date as per this section.
- Extension of statute of limitation period – since the ITA also faces certain limitations due to the ongoing war, the statute of limitation period of tax assessment hearings for tax years whose statute of limitation was the end of 2023 (normally the 2018 tax year) will be extended by three months from the end of the relevant period. Notwithstanding the aforesaid, it should be noted that according to a clarification that will be issued by the deputy director of tax assessments and audits at the ITA once the legislation is made public, as was presented by the ITA’s representatives to the Finance Committee, a tax assessment proceeding will only be permitted if a material public audit process had been launched before October 31, 2023 (such as application to a representative or taxpayer for disclosure of documents, email inquiries etc.).
No penalties will be levied on late filings until November 23, 2023. However, charges will be made for interest and linkage differences until the actual payment date. In certain cases, a specific application can be filed with supporting documents for waiver of interest and linkage differences charges.
Drafted army reserves and residents of the South and Gaza (& immediate surroundings) who have not filed said reports for September 2023 qualify for full waiver of interest and linkage differences charges. Specific applications must be filed online.
The first date for filing annual reports for 2022 by companies has been deferred from October 31, 2023 to November 30, 2023.
The second date for filing annual reports for 2022 by individuals has been deferred from November 30, 2023 to December 31, 2023.
Capital declarations that are due for September 1, 2023 and thereafter have been extended until the December 31, 2023 or the date of filing the reports for 2022 based on the representatives’ extension arrangement.
Filing for tax objection and appeal extensions, filing documents and managing tax assessment procedures through all the tax systems – in the coming fortnight, as a show of consideration, the ITA will offer flexibility in managing current procedures and will initiate new procedures. A directive has been issued to firms by the senior deputy director of tax assessments and audits at the ITA via the following link.
Special application channels have been launched at the PIS and for drafted representatives regarding income tax, VAT and real estate taxation.
The duty of employees to report retirement from their workplace using the new Form 161 has been deferred to January 1, 2024.
The date for filing claims for indirect damages caused by Operation Shield and Arrow has been extended to October 31, 2023 (see more information below).
The validity of automated accounting system management software registration certificates which expired on or after September 30, 2023 has been extended to November 30, 2023.
The ITA and the Ministry of Finance have issued press releases, according to which the Minister of Finance has instructed the Director General of the ITA to identify residents whose homes have been damaged by the war to grant them preliminary financial aid as prepayment from the property tax compensation fund. Since the employees of the compensation fund are currently not allowed to enter the settlements of the Gaza area due to security reasons, the fund’s management and the heads of the Eshkol, Hof Ashkelon and Shaar Hanegev regional councils have agreed to cooperate in order to assist the residents.
It is intended that the compensation fund will receive from the regional councils in the Gaza area lists of names of homeowners whose homes have been damaged and means of communicating with them. Once the lists are obtained by the fund, the employees will contact the families, explain their rights and open claims on their behalf and if applicable make sure the families receive prepayment on account of the compensation. The fund has appointed a project manager to continue supporting and assisting the families.
The National Insurance Institute issued a press release on the subject, see the following link.
Due to the war and widespread draft of IDF reservists, the payment for the reserve duty from the date of this notice until further notice will be made at the beginning of each month and not at the end of the reserve duty period as practiced before. The payment will be automatically forwarded to the bank account. There is no need to file a claim. For more information
The Customs and VAT Department has issued a new procedure outlined in the following link.
Due to the war, from October 16, 2023 until further notice, for the calculation of import taxes, the transaction price will not include the shipment costs incurred to importers. For more information
In the context of the national emergency caused by the war and to provide effective and rapid response to the various needs during wartime, the ITA will allow nonprofits and public benefit companies with valid certification as per Section 46 to the Income Tax Ordinance (Revised), 1961 to expand their operations and raise donations to assist in the war effort even if such operations are not defined in their articles of association as their public objective.
See the full directive outlined in the following link.
Following applications by numerous local companies, the ITA’s management held conversations with the Israel Growth Forum and agreed to allow employees to donate vacation days to the war effort, free of withholding tax, as long as the employer designates the funds as donations. An official directive will be issued soon.
In view of the current security situation, the ITA will allow remitting input withholding tax from tax invoices without an allocation number until March 31, 2024.
For more information
In view of the current security situation caused by the Words of Iron War and the numerous questions received on how to charge the value in use of private cars used by drafted army reservists and employees under unpaid leave, following are the published guidelines.
- Nonprofits: deferral of reporting dates
As per the Association Law of 1980, nonprofit associations are required to file annual reports (financial statements, verbal reports and more) by June 30 of the year following the end of the reporting period. However, as per an extension arrangement reached with the Institute of Certified Public Accountants in Israel, the last extension for filing the annual reports was supposed to be October 30, 2023.According to a notice released by Attorney Shuli Avni Shoham, Director General of the Israeli Corporations Authority and Registrar of Associations, another extension has been granted until November 30, 2023.
The notice also states that this extension also applies to associations that received proper management certification for two years (2023-2024) which are required to file reports for 2022 as a prerequisite for the extension of the validity of their proper management certification for 2024.
- Comprehensive outline by Bank of Israel adopted by Israeli banks to offer war related reliefs to their customers
On October 15, 2023, the Bank of Israel issued an initial idea, designed to assist populations affected by the war, mainly residents of the South and Gaza surroundings, drafted security forces, evicted populations and first-degree relatives of those killed, kidnapped and missing. Link to the BoI’s notice.
- Capital Markets, Insurance and Savings
In view of recent developments, the insurance renewal circular had to be adjusted to allow policyholders to take educated risk management steps and inactivate certain insurance coverage items as well as allow insurers to extend renewal periods beyond original termination dates when failing to contact policyholders. This amendment applies until the earlier of the date of termination of the national state of emergency or January 1, 2024.
The Commissioner of the Capital Market, Insurance and Saving Authority has allowed institutional entities to exclude their call center data during wartime from their annual averages.
This amendment applies until the earlier of the date of termination of the national state of emergency or January 1, 2024.
In order to enable institutional entities to operate in a national state of emergency and optimally utilize their resources for assisting their customers and in view of the challenges experienced by the public of savers to make decisions regarding their pension savings during these times, the Commissioner has deferred the effective date of the Institutional Investor Circular 2022-9-30 which revises the directives regarding provident fund investment channels to July 1, 2024.
In view of the curtailment of operations by the majority of players in the pension savings market due to the war and to allow the market players, particularly institutional employers, to prepare for the adoption of the open format circular directives, it has been proposed to defer the effective dates of some of the circular’s directives as stated in the Commissioner’s notice.
Due to the war and the technical difficulty experienced by institutional entities to comply with the duty of issuing quarterly member reports for Q3 2023, a deferral of 30 days has been granted and the duty of sending the quarterly report via post at the member’s request has been canceled.
It has been proposed to defer the effective dates of certain directives regarding employers with fewer than 3 employees to June 2024. It is also proposed to defer the effective date of the summary feedback directives which require delivering the feedback on the same date.
A 31-day extension will be granted until December 31, 2023 for issuing periodic reports of pension funds, managing companies and insurance companies, including SCR reports for the data as of June 30, 2023.
The following extensions have been granted for filing reports to the Commissioner by pension funds, managing companies and insurance companies:
- A 31-day extension until December 31, 2023 for issuing quarterly periodic reports and actuarial reports of pension funds, quarterly periodic reports of managing companies and quarterly periodic reports of insurance companies.
- A 31-day extension until December 31, 2023 for issuing yield component reports of pension funds, provident funds and insurance companies.
- A 60-day extension until March 31, 2024 for filing Own Risk and Solvency Assessment (ORSA) reports.
As a relief, it has been proposed to defer the initial reporting date of forward-looking sensitivity analysis scenario reports required in the context of ORSA reporting to the next reporting date in January 2025.
An amendment aims to offer greater flexibility to institutional entities when making capital market investments specifically with respect to the scope of analytical procedures that must be performed before purchases of bonds in the secondary market and extending the validity dates of existing analyses. The circular also allows institutional investors to purchase corporate bonds with greater flexibility compared to the recommendations of the Hodak Committee, to facilitate investments and optimize secondary market opportunities for a predetermined period of three months.
It is also proposed to alleviate the Commissioner reporting requirements applicable to institutional investors with respect to material active or passive excesses and extend the timeframe for reporting such excesses from 10 business days to one month, this as a temporary provision for three months.
An amendment which offers a relief for the duty of the institutional investor’s board and its committees to physically convene at least once a quarter. It is proposed to eliminate this duty until the end of 2023.
In view of the ongoing war in Israel and the resulting reduced operations of insurance companies, the National Insurance Institute and the sick funds, difficulties have arisen in gathering the necessary information for reviewing and settling LTC insurance claims as required by the circular. Therefore, it has been proposed to amend the circular to alleviate the requirements for reviewing and settling such claims alongside the continued supervision of the insurance companies’ compliance with the circular’s directives by the Authority and oversight over the LTC insurance claim settlement process including necessary timeframes.
As a form of relief, it is proposed to defer the date of initial filing of the chief actuary report from the end of 2023 to 2024 to allow filing the actuary report as of December 31, 2023 with the related solvency capital requirement (SCR) reports in 2024.
- Grants
The IIA has launched a fast-track grant channel for Israeli startup companies with significant technological assets, and short runways for companies struggling to raise funds from their existing investors during these challenging times. In addition, the European Union’s Horizon program responded to the Innovation Authority’s request and postponed the application deadlines for leading European programs.
For more information
- Ministry of Finance
Economic Responses to the War: The MOF’s outline offers responses for the security challenges, the affected residents and the general market.
For more information
Compensation for direct and indirect damages and business continuity grant
- Ministry of Economy: Employee training grants program
The Employer and Human Capital Development Administration and Ministry of Economy jointly launched an employee training grants program which will apply during Operation Swords of Iron and consists of two designated tracks – classroom training and mentorship. The tracks will operate until the Minister of Defense declares the end of the special state of emergency in the Israeli Homefront. The grants range between NIS 4,000 and NIS 15,500 per approved employee. Applications can be filed for up to 50 employees per employer for both new and current employees. An essential enterprise may apply for up to 200 employees. The program is available in the following segments: industry, metal, wood, welfare, food and beverage manufacturers, transport and storage services, agriculture, toiletries, cleaning and cosmetics manufacturers, transportation, communications, IT services, construction, hotels, security and more.
The program will be based on “first come, first served” until full budget utilization.
- Swords of Iron Grant Calculator
*The information presented in this website is for access purposes only. For specific information please refer to the source.
How EY Can Help?
We would be happy to hear from you and help, in any way possible. We have gathered several highlights for our clients and non-clients to assist in dealing with these difficult times.
Consulting
Funding and cash flows
- Funding solutions
- Crisis management for working capital
- Crisis management for cash and resources
- Applying forecast in a changing environment and adjusting funding solutions
- Procurement enhancement and adjustment
- Expense optimization
Tzafrir Tomashin
HR
- Supporting employees – plan for crisis assistance, management, recruiting and adaptation
- Assisting drafted family members of employees
Jody Bareket
IR and PR management assistance
- Providing access to and the adaptation of Best Practices for crisis management with different stakeholders
- Crisis communication – advising on communication and information, updating shareholders, directors, suppliers, customers, employees, media, regulators
- Coordinating performance expectations, managing concerns and strategic coordination
- Preparing dialogs and discussions with the board and investors
Jody Bareket
Supply chain
- Assessing a company's critical suppliers under the current circumstances and identifying business continuity alternatives
- Identifying critically short staffing and employee mobilization
- Substitute employees – have substitute employees be qualified for critical functions? Assisting in mapping functions, required qualifications and temporary/substitute employees
- Operations – creating operational continuity of customer supply orders, including demonstrations/installations/support/conveyance/transportation/personnel/substitute suppliers
- Inventory storage diversification to minimize risks of rockets hitting unbacked inventory
- Ordering and managing larger security inventory for extreme scenarios
Alon Levy
Ido Aon
Crisis management
- Crisis management teams and tools – teams to analyze recent developments and make critical decisions until such time as the situation return to its norm.
- Operating an emergency plan – the crisis management team will analyze different war scenarios such as army reserve, eviction plans, office security, fires, rockets etc.
- Flexible workplan, remote work and availability of appropriate infrastructures
- Risk management – ongoing and updated risk management and strategy decisions
- Collaborating with local authorities, ongoing contact and reports, collaboration with similar companies in the industry to join forces and deal with the situation
- Reviewing insurance policies and understanding policies and coverage terms
Ariel Horowitz
Zachi Refaeli
Analyzing and assisting in business continuity and backup setup
- Assisting in the defining of criteria for returning to routine operations
- Writing emergency protocols
- Relocation of essential processes and services, relocation of branches, mobilization of branches
- Manual labor – designing a backup plan of manual labor processes without IT systems for critical processes
- Backup system
- Remote work policy – data security and control mechanisms
- Segregation of duties in critical processes
- Analyzing insurance coverage
- Analyzing supplier business continuity
- Protection of critical sites and offices - keeping employees safe
Ariel Horowitz
Adiram Kidron
David Carmi
Digital Solutions
Establishing, managing and maintaining the key KPIs for the business in situations like this.
- Operational Resilience - enhance operational efficiency, do more with fewer resources
- Cost Optimization - cost savings through process optimization and automation
- Adaptability and Flexibility - enable businesses to pivot and adapt quickly
- Customer Engagement and Loyalty - Maintaining strong customer relationships
- Data-Driven Decision-Making -Informed decision-making is critical
- Humanitarian and Social Impact - social initiatives and humanitarian efforts, fostering a sense of corporate responsibility
Craig Levy
Immediate assistance in the war effort
- Handling donations
- Customs clearance
- Work permits
Timing of receipts and payments
- Income tax directive on deferral of reports to October 26, 2023 and deferral of dates for filing tax returns and capital declarations
- Income tax directive on deferral of reports to October 26, 2023 and deferral of dates for filing tax returns and capital declarations
- Prepayment adjustment
- Handling and assisting WHT-free foreign currency transfers abroad with banks and the ITA, mainly regarding payments to related parties and in grossing items
- Foreclosures, penalties – update on income tax directive and assistance in filing specific applications to the ITA
Timing of expenses and income during the war
- Current deductions of R&D expenses
- Utilization of foreign tax credits about to expire
- Deduction of provisions
- Application of Dollar Regulations (when filing tax return) mainly regarding exchange rate valuation gains
- Deferred revenue
- Eligibility for reduced corporate income tax rates for foreign industrial R&D enterprises (cost plus companies), compliance with preferred technological enterprise criteria
Deduction of expenses for tax purposes
- Option expenses – violations and chargebacks as applicable
- Employee support – transportation, borrowing office equipment, social events, support of employees' family members (including donation credits)
- Application of Section 27
Audit – Business Continuity
- Business continuity in financial reporting and filings
- Special permits – army reserve duty, tenders, Chief Scientist, income tax and more
- Settling and consulting on donations
- Handling reports for financial support purposes
- And more
First Response Support Team
EY teams, Partners and Managing Directors are at your service.
We have set up a first response support structure for companies and enterprises without a designated project manager or contact person.
Other Initiatives
- Information of various needs and access to the relevant authorities – tax, government support, Ministry of Finance, Bank of Israel, the ITA, income tax, the Innovation Authority
- Deferring reporting dates
- Connecting to the industry's operations centers
- HiTech Operations Center – volunteering and raising funds led by Fiverr and HiBob in association with One Heart Association
Nati Alon
Itay Zetelny
EY for the Community
EY and its people have rallied to help the community through volunteering, making donations and assisting with external communications. Some of the projects we have initiated include:
- Opening a logistic center of Alon and Ella, a nonprofit organization, to package and deliver supplies daily, for residents of the southern district and the IDF
- EY employees have opened up their hearts and homes to families from the southern district that evacuated their homes
- We have raised donations to purchase equipment for IDF soldiers
- We have donated dozens of laptops to Sheba Medical Center and to other nonprofit organizations for people evicted from the Gaza surroundings
- We have transformed our office classrooms into accommodations for soldiers, working around the clock
- We assisted in creating an operations center with the CEOs of all the local airline companies to help bring back Israeli from overseas, who have been drafted
- Our consulting teams have collaborated with the Israel National Cyber Directorate for offering professional cyber assistance which successfully detected and reported several critical security breaches that were immediately rectified to help protect the safety of our citizens
- We have sent treats and other necessities to the special unit of the Israeli Artillery Corps "Zik" which we have adopted and embraced for many years
- EY Global has donated 2 million dollars to civilian organizations that financially support residents evicted from the Gaza surroundings and IDF combatants
- Our people volunteer in numerous places such as Shufersal and Carrefour supermarkets to assist with preparing supplies
- EY employees have volunteered to assist businesses in the Gaza area affected by the war by checking their qualification for special government grants for businesses in the south of Israel ("Otef Laesek")