Most Israelis have never used the services of an Israeli accountant. This is because taxes are automatically withheld from their salaries and they don’t need to file an annual tax return. However, there are some situations in which working with an accountant can be beneficial or even crucial.
Opening a business
It is possible to open an Osek Patur or Osek Murshe without the help of an accountant, but it can be overwhelming and confusing if you aren’t familiar with the process. Hiring an accountant ensures the process goes smoothly and saves you time and energy.
Business compliance
Reporting your business income and paying taxes, Bituach Leumi and VAT doesn’t officially require the services of an accountant. You may find, though, that doing it yourself is just too complicated. An Israeli accountant or tax advisor (Yoetz Mas) can ensure that your business is compliant and prevent problems with the authorities. The higher your profit, the more important it is to work with a trustworthy and competent accountant.
Declaring assets
At some point after you open a business, you will receive a request from the Israeli government to declare your assets. This document, called Hatzharat Hon, must be filled out correctly, because it serves as the base for all further reporting of assets. The government uses this document and subsequent ones to check that you aren’t hiding income, so it is highly recommended to fill it out with the help of an accountant.
Managing employees
Businesses that have employees need accountants or payroll specialists to manage payslips, pension contributions, severance pay, Bituach Leumi and withholding taxes.
(If the headache of owning your own business and its accompanying accounting expenses are more than you can (or want to) handle, look into the option of becoming an employee of an Employer of Record service.)
There are also some situations where you might need an accountant, even if you don’t own a business.
Refund requests
While most salaried employees don’t need to file tax returns, you may want to if you had more than one employer in a year, took unpaid leave, were on maternity leave, received unemployment benefits, or made significant charitable donations. An accountant can make sure you get refunds instead of overpaying.
Passive foreign income
New immigrants and returning residents (who lived outside Israel for at least 10 years) are entitled to a ten-year exemption on reporting and paying Israeli tax on passive foreign income. Because the interplay between Israeli law and foreign tax systems is tricky, this is one area where an accountant can save you from expensive mistakes, and sometimes even structure your assets in a way that maximizes your exemption window. In addition to understanding exactly which income qualifies for the exemption, an accountant can also assist you in planning for the transition to paying taxes on this income once the ten years are over.
Bottom line, if you own a business you are more likely to need the services of an accountant to open the business, report income, pay taxes, declare assets and manage employees. If you’re an employee of an Israeli company (EOR or otherwise), you might still hire an accountant to help you navigate complex situations such as income fluctuations and passive foreign income.
