Financial Assistance to Self-Employed Taxpayers Amidst the Coronavirus Crisis

Many self–employed taxpayers were financially hit by the Coronavirus pandemic. On April 2^nd, 2020 the Government approved Regulations allowing self-employed taxpayers, which saw a decrease in their relative turnover, to file a request for a one-time grant of up to 6,000 NIS.

The first-phase grant includes the following provisions:

• Eligible are self-employed taxpayers that turned 20 during the year 2019, or older.
• The taxpayer's business was fully active during the period between March 1^st, 2019 – February 29^th, 2020.
• Yearly income during the tax years 2018 or 2019, has ranged between 24,000 NIS – 240,000 NIS.
• The total household annual income (including with a spouse) did not exceed 340,000 NIS.
• There was a decrease in turnover of at least 25% during the months of March and April 2020 relative to the turnover during the same months in 2019.
• The taxpayer has duly filed his 2018 tax return (unless the business started activity during 2019, in which case it is necessary to file the 2019 tax return), as well as duly filed VAT returns.
• The taxpayer did not breach his book-keeping requirements.

The First- Phase Grant Amount

• The first-phase grant would be set on 65% of the average monthly income during the tax year of 2018 (or 2019, if the business started activity during 2019) and will not exceed 6,000 NIS.
• If the average monthly income exceeds 16,000 NIS, the grant amount would decrease by an amount equal to 75% of the amount exceeding 16,000 NIS.
• To receive the grant, a simple on-line form to fill out at the taxpayer's personal zone on the Tax Authority website.
• The request must be filed by June 10^th, 2020. The application must be examined within 10 days of the request submission. payment must be made within 10 days of confirming eligibility by the tax authorities.
• The Grant is subject to Income tax but is exempt of VAT and Social Security payments.

The first- phase grant was met with heavy criticism for lack of self-employed tax payers eligibility. The Israeli Government consequently announced on April 8^th a second phase grant, which includes a larger grant amount and stringent eligibility requirements. Binding second phase regulations have not yet been issued.

According to the statement the second-phase grant includes the following provisions:

• Eligible are self-employed taxpayers that turned 20 during the year 2019, or older.
• The taxpayer's business was fully active during the period between April 1^st, 2019 – February 29th, 2020.
• Yearly income during the tax years 2018 or 2019, has not exceeded 1,000,000 NIS (as opposed to the first-phase grant which set the maximum yearly income on 240,000 NIS).
• The total household annual income requirement has been cancelled.
• There was a decrease in turnover of at least 25% during the months of March to June 2020 relative to the turnover during the same months in 2018 or 2019, to be elected by the taxpayer, and provided that a tax return was filed for the elected tax year.

Employees of companies who are also Controlling Shareholders of these companies would also be eligible to receive the grant.

The second-phase grant amount

• The second-phase grant would be set on 70% of the average monthly income during the tax year of 2018 (or 2019, if the business started activity during 2019) and will not exceed 10,500 NIS.