Voluntary disclosure in Israel – failure to report rental income

The Israeli Tax Authority has increased its efforts against owners of residential units and real estate properties who have neglected to record rental income after years of slack enforcement. If you rent out your property, you must pay income tax on the rental revenue unless the sum is exempted from tax according to the Israeli law. This is true whether the property is in Israel or elsewhere.

More information on rental taxation can be found here 

While the voluntary disclosure procedure is no longer valid in 2023, it is highly recommend proactively contacting the Tax Authority to settle the tax liabilities in a manner that is similar to Voluntary disclosure. This step may assist you in avoiding both criminal charges and civil fines. You can even settle tax debts for previous years.

Our firm will do an optimal tax computation and select the most favorable path for you, whether that requires filing reports or contacting the Tax representative directly. We will also negotiate  to reach a settlement  with Israel Tax Authority.

Those who own properties in other countries should be aware that not only rental income is subject to taxation in Israel, but so are any financial gains from the sale of a property. If relevant, examine the Double Taxation Prevention treaty to determine which nation has the first right to tax the income, and for ensuring that you are entitled for foreign tax credits. If you own many real estate assets or buy property for repair and resale, your income may be classified as a business income rather than passive income. Click here for an explanation of the criteria for income classification as business income.

Our firm has an extensive experience resolving voluntary disclosures and other real estate-related tax concerns. We give comprehensive support from the initial calculating stage through negotiating with  Israel Tax Authorities and reaching a settlement. If you have any further questions, please contact our office.