Dear Clients,

With the start of the year 2026, we recommend reading the article below, which highlights several important points for business owners.

1. Income Tax and National Insurance Advances and Review of Business Status We recommend reviewing the accuracy of the tax advances you are paying in light of your projected income for 2026. If necessary, an update of these advances should be performed with the Tax Authority and National Insurance. If a significant change has occurred, it may be necessary to change your legal status with the authorities, such as:

• Moving from “Non-regular Independent” to “Independent” status at National Insurance.
• Moving from “Exempt Dealer” (Osek Patur) to “Licensed Dealer” (Osek Morshe) at VAT.
• Moving from “Independent” to a “Limited Company” (LTD) at Income Tax. We invite you to contact us regarding this matter. American citizens should pay attention to the special implications regarding National Insurance payments to the United States. If this is relevant to you, please contact us for further details.

2. Withholding Tax Certificates We recommend checking the validity of your business’s Bookkeeping Certificate and Withholding Tax Exemption. These are certificates you are required to provide to payers so they know whether to withhold tax at the source or transfer the full amount to you. Here is a link to Information Regarding Tax Certificates.

3. Micro-Business (Esek Ze’ir) We remind you that since 2024, small businesses are allowed to define themselves as a “Micro-Business” for income tax purposes. This definition is suitable for businesses with a turnover of up to 120,000 ILS and entitles them to several concessions and benefits, including:

• Recognition of “notional expenses” at a rate of 30% of total turnover.
• In most cases, an exemption from Capital Statements (Hatzharat Hon).
• In most cases, an exemption from filing an Annual Tax Return.
• In most cases, simplified bookkeeping requirements. To define yourself as a Micro-Business, you must register in the Personal Area on the Tax Authority website and report your estimated expected income for the tax year. If there is also salary income, tax coordination must be performed through the tax coordination system for that income as well. Clients who declared a Micro-Business status for their income at the end of 2025 are required to file a special report on their business income, which in some cases can replace the obligation to file an annual return. This report must be submitted by 31.3.2026. Link to the Micro-Business Reporting System. For further details on the Micro-Business Reform.

4. Exempt Dealer Declaration We remind you that Exempt Dealers (referring to VAT exemption) are required to perform an Exempt Dealer Declaration and report their turnover for the year 2025 to VAT by 30.1.2026. Link for the Exempt Dealer Annual Declaration.

5. Pension and Study Fund (Keren Hishtalmut) Contributions We recommend reviewing the appropriate contribution levels for your pension fund and study fund. Please note that even if you are a salaried employee, you should make independent contributions simultaneously. Our office offers consulting and guidance services in this field with recommended pension agents who also provide services in English.

6. Ongoing Bookkeeping Businesses are required to maintain ongoing bookkeeping according to their business type and the Tax Authority’s bookkeeping regulations. Business owners who are interested in our bookkeeping services in addition to the submission of the annual report are invited to contact us by replying to office@hb-cpa.co.il and we will be happy to assist. Bookkeeping services include, among others:

• Calculation of advances – Income Tax and National Insurance.
• Reporting of advances – monthly / bi-monthly.
• Recording of income and expenses for the calculation of advances and preparation for the annual report.
• Assistance in making payments to the various systems.
• Assistance in updating status with the authorities.
• Guidance regarding pension contributions.

 Bookkeeping services are also available in English.

We wish you a successful year. Our office team is available for any questions you may have.