אריאל מוכתר – רואה חשבון

What Is a Capital Declaration?

To prevent tax evasion, the Israeli Tax Authority uses capital declarations as one of its primary tools to identify discrepancies between reported income and actual financial growth.

A capital declaration is a formal report submitted by a taxpayer detailing all assets and liabilities as of a specific date.

It enables the Tax Authority to evaluate whether the taxpayer’s reported income and tax payments over time reasonably explain any increase in wealth.

Who Is Required to Submit a Capital Declaration?

1. Self-employed individuals (Osek Patur or Osek Murshe)
2. Business owners and company shareholders
3. Salaried employees with high income

Anyone explicitly required to do so by the Tax Authority.

Typically, a first capital declaration is requested shortly after opening a business. Under newer regulations, those classified as Osek Zair (micro-businesses) may be exempt from this requirement at business launch.

How Does the Tax Authority Use It? The Tax Authority compares two declarations submitted several years apart (usually 5 years). It then examines whether any growth in assets over that period aligns with reported income and reasonable living expenses.

Example

Israel opened a business in 2015 and submitted a first declaration showing NIS 1,000,000 in assets.

He earned NIS 200,000 per year for the next 5 years.

In 2021, he submitted a second declaration showing assets of NIS 1,500,000.

The Tax Authority checks whether this NIS 500,000 increase is consistent with average living costs (according to official “standard of living” tables).

If not, they may demand additional tax for unreported income.

What’s Included in a Capital Declaration?

The declaration includes the full financial status of the taxpayer and their immediate family (spouse and children under 18), reported as of a specific date—usually December 31. It consists of two main parts: 1. Private Assets and Liabilities 2. Business or Company Assets and Liabilities

Assets May Include:

Real Estate: Apartments, land, lots

Vehicles: Cars, motorcycles, any motorized vehicle

Bank Accounts: Current accounts, savings, deposits

Securities: Stocks, bonds, mutual funds, investment portfolios

Insurance & Savings: Life insurance, pension plans, foreign currency accounts

Valuables: Home contents, jewelry, collectibles, gold

Liabilities May Include:

Mortgages and Loans: From banks, private lenders, non-bank institutions

Personal Guarantees

Credit Cards and Future Payments

Why Timely and Accurate Submission Matters

Taxpayers are usually given 120 days to submit the capital declaration after receiving an official request.

If needed, deadline extensions can be requested—especially in cases where documentation is difficult to obtain. Failure to submit on time may result in a monthly fine of NIS 380 and may disrupt ongoing business activities. For example, the Tax Authority might refuse to renew your withholding tax exemption, making business transactions more complex.

Submitting incorrect or incomplete information—or failing to submit at all—can constitute a criminal offense.

Service Cost

The cost of preparing and submitting a capital declaration depends on its complexity. Fees typically range from ₪700 to ₪2,000.

Preparing a capital declaration involves strict reporting standards and technical documentation. Accurate asset valuation and correct annex preparation are essential—and require professional care. I invite you to contact me for a personal consultation and quote tailored to your specific case.