About Iasrael Taxes Authority

 

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General Information - Iasrael Taxes Authority

  
 
General

The Israel Taxes Authority (ITA) was established following a Government decision on September 15, 2003 to merge the Department of Income Tax and Land Taxation, the Department of Customs and VAT and the Automated Processing Service, with a view to "consolidating the management of tax collection under one main administrator, to be invested with legal authority to implement the relevant tax laws." The merger took effect on September 1, 2004.

 


Since March 2018, Eran Yaacov has been Director of the Israel Taxes Authority.
The establishment of the ITA was an important move towards increasing the efficiency of the tax system, improving the service to the public and contributing to law enforcement in Israel. The authority, which numbers 5,700 employees, consists of the following units:


1. The management, which deals with administrative matters and includes the Director, his 
    deputies and the professional departments.

 

2. The field offices:

    • Income tax and real estate taxation – 26 regional assessment offices, 10 regional land tax 
      offices, 4 regional investigation units, a national intelligence unit, and one national and 3 
      regional collection enforcement units.

 

    • Customs and VAT – 8 customs houses, 9 international land border crossings, 8 internal 
      crossings (along the Green Line), 3 overseas offices, 18 regional VAT stations (including 3
      regional purchase tax offices), VAT liaison to the Palestinian Authority, 4 regional
      investigation units, a national intelligence unit, and a headquarters unit for the prevention of 
      drug smuggling and money laundering.
      In the field of income tax and real estate taxation, the ITA is responsible for the collection of
      direct taxes, real estate tax, extraordinary levies, payroll tax and revenue tax. The ITA
      operates by virtue of laws, regulations and directives, chief among them the Income Tax
      Ordinance, the Land Taxation (Appreciation and Purchase) Law, the Property Tax and
      Compensation Fund Law, the investment incentive laws ("Encouragement Laws"), the Value
      Added Tax (Payroll and Profit Tax) Law, the Administrative Offenses Law, the Taxes
      (Collection) Ordinance, the Income Tax (Taxation under Inflationary Conditions) Law, and the 
      Income Tax (Inflationary Adjustments) Law, as well as various tax-related directives that are 
      included in other laws and regulations.

 

In the field of customs and VAT, the ITA is responsible for the collection of indirect taxes that are imposed on the consumption of goods and services. The taxes collected include VAT at a uniform rate on all transactions in the economy, customs duties on all imported goods, purchase tax on imports and domestic goods, and fuel excise on all types of fuel.

 
Tax Collection
The ITA's primary function is to collect the following taxes:
1. Direct taxes – income tax, capital gains tax, real estate appreciation tax

   Direct taxes are levied directly on the taxable income of individuals and companies generated 
   from regular economic activities and from one-time capital transactions. In general, income tax
   is charged at a progressive rate on the earnings of individuals and at a fixed rate of 23% 
   on the earnings of companies. Capital gains tax and real estate appreciation tax are charged 
   on profits from capital transactions of individuals (usually at a rate of 25%) and companies (at 
   the same rate as the tax rate on their regular earnings).
2. Taxes on real estate transactions
    Real estate purchase tax, set as a percentage of the value of the transaction, is payable by 
    the buyer, while the seller is required to pay appreciation tax on the profit accruing to him 
    from the sale of the real estate.
3. Indirect taxes – customs duties, purchase tax, VAT, fuel excise

    • Customs duties are imposed only on imports of goods, at the rates specified in the 
      Customs  and Purchase Tax Tariff. Changes (mainly reductions) in the customs rates apply 
      by virtue  of trade agreements to which Israel is a party, including agreements with the EU, 
      the US, EFTA, Canada, Turkey and Mexico.
    • Purchase tax is imposed both on imports and on domestic goods and applies mainly to 
      imports of vehicles, cigarettes, fuel, cell phones, alcohol. 
      Purchase tax is charged at the same rate on imported goods and domestic goods of the 
      same type. At the beginning of the 1990s a policy of gradual reduction in the purchase tax
      rates was implemented in order to drive economic growth, and it remains in force to this day.
    • Value-added tax (VAT) is levied on the price of domestic transactions, imports and ervices, 
      at a uniform rate as determined in an order of the Minister of Finance (17% as of the date 
      of  this publication).
    • Fuel excise is levied at a fixed amount on fuels such as gasoline, diesel, petroleum, gas, 
      coal and heavy fuel oil (mazut). The amount of the tax is adjusted every three months in the 
      official Israeli government gazette (Reshumot), based on the consumer price index.
4. Payroll and profit tax imposed on financial institutions and payroll tax imposed on
    non-profit organizations
 
    These taxes are prescribed in the VAT Law, which also charges the ITA with their collection. 
    The imposition of VAT on the services provided by these entities is technically complicated, 
    and the legislature therefore opted for an economically equivalent alternative that is 
    calculated as a function of the entity's profits and the wages paid by it. These two parameters
    serve as a basis for the calculation of income tax, which is why the ITA was made esponsible 
    for the collection of these taxes. 

 

 
Additional Functions of the ITA

• Enforces the conditions for legality of imports and exports in order to prevent illegal activities in 
  such areas as standards, health, quality of the environment, intellectual property, drugs, 
  imports from countries with which Israel has no diplomatic relations and commercial fraud. In
  recent years, due to international treaties and agreements that were signed, the ITA has
  increased its activity in the fields of intellectual property and money laundering.

• Supervision of commercial imports to the territories of the Palestinian Authority through all 
  seaports, airports and land border crossings, including the performance of security checks.

• Expansion of international cooperation in customs matters – Simultaneously with the trend 
  towards reducing import tax rates, international cooperation in the sphere of customs has 
  expanded, including investigations, simplification of processes and procedures, linking of 
  information systems, accession to international treaties and signing of trade agreements.

• Payment of compensation for war and drought damage pursuant to the Property Tax and 
  Compensation Fund Law, 1961. Funding for the compensation fund originally came from 
  property tax, but beginning in the year 2000, with the cancellation of this tax, funding derives 
  from real estate purchase tax.

• Employment grant (negative income tax) – On December 18, 2007, the Law to Increase the 
  Rate of Participation in the Workforce and Reduce Social Gaps was enacted, including the 
  "Negative Income Tax Law." The purposes of this law are to provide an incentive to join the job 
  market, to increase the disposable income of workers at the lower end of the pay scale and to 
  reduce the economic gap between low and high income earners. Since its enactment the law
  has been implemented gradually. Starting in 2011, workers nationwide who meet the defined
  criteria are entitled to receive the grant. Starting in 2013, there has been an increase of 150%
  in the employment grant for working mothers and for single-parent fathers supporting children 
  who live with them. 

 
Organizational Structure of the ITA

 

 
 

1.  ITA Deputy Director

a. Planning and Economics Division – Deals with planning, economics and policy and 
    analyzes  all aspects of the tax system, integrating between the different types of taxes. It also
    formulates  alternatives to legislative reforms and is responsible for publicity: economic
    briefings, professional guidelines, work plans of the ITA and measurement and evaluation of 
    the performance of the ITA's departments.

b. Compensation fund – Pays out compensation for direct and indirect damage resulting from 
    hostile actions, war and drought.

 

 

2. Assessment and Accounts Control Division


    In charge of three areas: income tax assessments for salaried employees, self-employed 
    individuals and companies; real estate tax assessments (appreciation tax and purchase tax 
    assessments), and auditing of VAT accounts. In addition, the division is responsible for the
    enforcement of bookkeeping rules and handles the payment of compensation to war and 
    drought victims. The division has overall responsibility for the uniform application of the
    assessment policy and for verifying the completeness and accuracy of reports received from 
    income tax, VAT and real estate taxation clients.

 

3. Intelligence and Investigations Division

   

    In charge of the enforcement of tax laws that are the ITA's responsibility and the handling of 
    cases of suspected criminal tax offenses. The division collects intelligence, gathers  
    evidence, 
    uncovers offenses and submits the relevant material to the legal units. The division operates 
    with other enforcement authorities, such as the Israel Police, the Israel Securities Authority, 
    the  Anti-Money Laundering Authority in the Ministry of Justice, etc.

4. Professional Affairs Division

 

    In charge of outlining policy on professional matters, including the initiation and handling of 
    bills and legislation amendments needed to adjust the tax laws to the changing economic 
    reality, the preparation of professional circulars, the establishment of work teams for dealing
    with tax matters and participation in various professional committees. The division is also 
    responsible for ensuring the correct application of all tax laws and for providing professional 
    guidance to field workers. In addition, it handles public inquiries relating to pre-rulings and 
    international tax matters.

5. Administration Division – The division is responsible for human resources development 
    and  for coordinating the ITA's activities vis-à-vis internal and external entities. The division 
    oversees the ITA's budget and the allocation of human, material and budget resources for 
    projects and activities carried out by the authority's units. The division also deals with 
    housekeeping, computing, training and work relations and integrates between these areas.


6. Legal Division

 

    Deals with civil and criminal matters. In the civil sphere, the division handles the planning and 
    formulation of bills and provides legal assistance to the state prosecution, to the 
    management  units and to the field units. In the criminal sphere, it prepares and prosecutes 
    criminal VAT and  customs cases involving substantive tax offenses as well as basic criminal 
    income tax, VAT and  customs offenses.

7. Collection Enforcement Division

 
    In charge of setting policy for collection from self-employed individuals, companies and 
    salaried employees, deductions, real estate taxation and VAT collection. The division is also 
    responsible for setting debt management policy and for following up all the collection 
    enforcement processes. The division operates an enforcement system for the collection of 
    taxes relating to the ITA, and if necessary it also activates the collection enforcement units 
    and  "Force 100" for dealing with tax dodgers.

8. Automated Processing Service

 

    Unit managing the ITA's entire IT system and responsible for the development of a 
    supportive computer system, computer and communication infrastructures, databases, etc.

9. Internal Control and Ombudsman Division


    Conducts internal audits in all the ITA's units, to verify compliance with the law and the 
    professional directives. The unit also investigates public complaints to ensure the compliance
    of the authority's employees with ethical standards. The division is responsible for the
    performance of systematic, independent and objective control and auditing procedures, for 
    the purpose of identifying defects and recommending ways to correct them. In addition, the 
    division is required to implement the recommendations included in the State Comptroller's 
    report.

10. Customs Directorate

 

    Sets foreign trade policy, manages the foreign trade system, enforces the conditions for
    legality of imports and exports, acts to prevent illegal activities (fraud, drugs, money
    laundering, intellectual property) and supervises all commercial imports to the territories of 
    the Palestinian Authority, including security checks. In recent years, the work processes of 
    the  Customs Directorate have been revolutionized, using advanced computing means that 
    make it possible to improve customer service while tightening supervision and enforcement
    of import  laws and the payment of lawful taxes.

 

11. Customer Service Division

 

      Responsible for maintaining an available, user-friendly and efficient interface with the
      public, for the provision of information and for the reporting and payment of taxes, with
      emphasis on  the creation of a single ITA-client point of interface, single-touch response,
      reduction of  friction with "innocent" clients, improving the availability of ITA offices to the 
      client and  collection-promoting service activities supporting increased collection. The  
      division is  developing client-oriented work processes involving the identification and
      elimination of service "bottlenecks." It is also working to implement efficient, quality work
      norms and to improve online service availability.

 

12. Office of the Chief Accountant of the ITA

 

      Responsible for the ITA's budget performance, while maintaining budgetary control and
      supervision, as well as for supplier payment and account services, financial management,
      keeping regular accounting records and payment of salaries to the ITA's employees. The
      Office of the Chief Accountant is also responsible for the submission of current and periodic
      reports to the Accountant General, as well as for the preparation of the ITA's annual
      financial  statements.

 

13. Spokesperson and Public Relations Division

 
      Responsible for relaying information to the public on the ITA's policies and activities, via 
      communication media and other informational media. The division provides the public with 
      the information it needs in its dealings with the ITA, with regard to ascertaining its rights and
      fulfilling its obligations. In addition, the division helps to strengthen the deterrence required
      for the ITA to carry out its job – meeting the State's revenue target, while imparting to the
      taxpayers a sense of fairness and equality. The division operates the ITA's website and 
      Facebook page as central interactive interfaces for activities between the surfer and the 
      ITA.

 

 

 
Legal References
The main legal references for the performance of the ITA's tasks, as described above, include:
 
• Income Tax Ordinance [New Version] 1961.
• Value-Added Tax Law, 1975.
• Land Taxation (Appreciation and Purchase) Law, 1963 (name of the law until January 1, 2000 
  – Land Appreciation Tax Law, 1963; name of the law until August 1, 2007 – Land Taxation 
  (Appreciation, Sale and Purchase) Law, 1963).
• Property Tax and Compensation Fund Law, 1961.
• Various investment incentive laws ("Encouragement Laws"): Encouragement of Capital
  Investments Law, 1959; Encouragement of Capital Investments in Agriculture Law, 1980;
  Encouragement of Industry (Taxes) Law, 1969.
• Inflation laws: Income Tax (Taxation under Inflationary Conditions) Law, 1982; Income Tax 
  (Inflationary Adjustments) Law, 1985.
• Administrative Offenses Law, 1985.
• Taxes (Collection) Ordinance.
• Customs Ordinance [New Version].
• Purchase Tax (Goods and Services) Law, 1952.
• Stamp Tax on Documents Law, 1961.
• Fuel Excise Law, 1958.
• Import and Export Ordinance [New Version], 1979.
• Customs Agents Law, 1964.
• Prohibition of Money Laundering Law, 2000.
• Law to Increase the Rate of Participation in the Workforce and Reduce Social Gaps, 2007.
 
 
State Revenues from Tax Collection
 
The ITA's revenues in 2017 totaled NIS 300.1 billion, compared to NIS 276.1 billion in 2016. Excluding legislation amendments and extraordinary events, tax revenues increased by 4%.
 
  • Revenue from direct taxes -  in 2017 totaled NIS 168.1 billion, compared to NIS 143.6 billion in  2016.  Excluding legislation amendments and extraordinary events, direct tax revenues increased in 2017 by 8% compared to 2016, which is higher than the national economic growth rate of 3%. 
 
  • Revenue from indirect taxes - in 2017 totaled NIS 132 billion, compared with   NIS 133 billion in 2016. Excluding legislative amendments, indirect tax revenues remained almost unchanged from last year.

 

 

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