ISRAEL

Meru Accounting provides customized outsourced accounting and bookkeeping services for businesses in Israel. Our team is skilled in handling Israel’s financial regulations and is proficient with the main accounting software used locally. We offer complete financial management solutions to make your business processes more efficient and ensure compliance with Israeli laws. Our goal is to simplify your accounting needs while keeping you up-to-date with the latest regulations.

Israel's indirect tax system primarily consists of Value Added Tax (VAT). Here are some key points about VAT in Israel:

1. Value Added Tax (VAT): VAT is the main form of indirect taxation in Israel. The standard rate of VAT in Israel is typically 17%. However, there are reduced rates for certain goods and services, such as basic foodstuffs, medications, and books.

2. Recent Developments: VAT regulations and rates may change over time based on economic conditions and government policy.

3. Taxable Transactions: VAT applied to most goods and services supplied in Israel .Exported goods and certain international services may be zero-rated.

4. Filing and Payment: VAT returns must typically be filed monthly or bi-monthly, depending on the size of the business.

5. Enforcements and Penalty: Not following VAT rules can lead to penalty and certain charges may apply. The ITA is responsible for enforcement and administration of VAT laws.

In Israel, several bookkeeping and accounting software solutions are commonly used by businesses of various sizes and industries. Some of them are listed below:

1. Priority: It is an Israeli-developed ERP (Enterprise Resource Planning) software that includes modules for accounting, financial management, inventory management, and more. It is widely used by medium to large enterprises across Israel.

2. Shoval: Shoval is another Israeli ERP software that provides accounting and business management solutions tailored to Israeli market needs. It is known for its comprehensive features and flexibility.

3. SAP Business One: It is an ERP solution designed for businesses. It includes accounting and financial management capabilities and is widely implemented globally, including in Israel.

4. Wave: Wave is a free accounting software designed for homegrown and small businesses and companies. It includes features for invoicing, expense tracking, and financial reporting, making it a popular choice for budget-conscious businesses in Israel.

In Israel, the currency used for bookkeeping and accounting purposes is the Israeli New Shekel (ILS), abbreviated as ₪ or NIS. The New Shekel is the official currency of Israel and is used for all financial transactions, reporting, and tax purposes within the country. Proper financial recording and reporting in Israeli Shekels are essential for compliance with local accounting standards and tax regulations. All transactions, financial statements, and audits in Israel must reflect amounts in ILS to ensure accuracy and uniformity in financial reporting. Additionally, businesses must monitor exchange rates when dealing with foreign currencies to accurately translate and report financial transactions involving other currencies into Israeli Shekels. 

The primary language used for bookkeeping and accounting in Israel is Hebrew. Hebrew is the official language of the country and is widely used in all official and business contexts, including accounting and financial reporting. Most accounting software and financial documents in Israel are prepared in Hebrew to comply with local regulations and standards. Financial statements, tax documents, and internal reports are usually prepared in Hebrew to comply with local regulations and for effective communication within Israeli businesses and government agencies.

Additionally, English is frequently used in international transactions and among multinational corporations operating in Israel, facilitating cross-border financial activities and compliance with global standards. Proficiency in Hebrew is essential for accounting professionals to ensure accurate financial reporting and adherence to the legal and regulatory framework in Israel.

In Israel, businesses are subject to audit requirements primarily based on their size and the nature of their activities. Here are the key points regarding audit requirements for bookkeeping in Israel:

• Tax Audits: Apart from statutory audits, businesses in Israel may also undergo tax audits conducted by the Israeli Tax Authority. These audits focus on ensuring compliance with tax laws and regulations.

• Auditor Requirements: Auditors in Israel must be licensed by the Ministry of Finance and registered with the Institute of Certified Public Accountants in Israel (ICPAI). They are responsible for conducting audits in accordance with legal and professional standards.

• Audit Standards : Audits must be conducted in accordance with Generally Accepted Auditing Standards (GAAS) in Israel, which are largely aligned.

• Audit Exemptions: Small and medium-sized enterprises exempts from statutory audit requirements if they meet certain criteria regarding size and turnover. 

• Statutory Audits : According to Israeli law, large companies must undergo an annual statutory audit. Large companies are generally defined based on criteria such as total assets, revenue, and number of employees.

In Israel involves several key aspects that businesses must adhere to, including legal requirements, tax obligations, and social security contributions.

Payroll Taxation And Income Tax: Employees in Israel are subject to income tax, which is deducted at source by employers and paid to the Israel Tax Authority (ITA). Tax rates are progressive, and employers are responsible for withholding the correct amount based on employee earnings.

Payment and Reporting : Employers are responsible for timely payment of salaries to employees, usually on a monthly basis. Employers must report payroll data to the tax authorities and social security authorities regularly, including details of employee earnings, tax deductions, and social security contributions.

Payroll Software and Compliance:

• Many businesses in Israel use payroll software to automate calculations, manage deductions, and ensure compliance with tax and labour regulations.

• Payroll software must comply with Israeli tax laws and regulations to accurately calculate income tax, national insurance contributions, and other statutory deductions.

Employment Contracts and Regulations: Employment contracts in Israel must comply with labour laws, which outline minimum wage requirements, working hours, overtime pay, and employee rights such as vacation and sick leave entitlements.

In Israel, the Generally Accepted Accounting Principles (GAAP) are primarily governed by the Israeli Accounting Standards Board (IASB), which sets the standards for financial reporting and accounting practices. 

Israeli Financial Reporting Standards (IFRS): The Israeli Accounting Standards Board (IASB) oversees the adoption and implementation of the Israeli Financial Reporting Standards (IFRS).

Legal Framework: Israeli GAAP is influenced by local laws and regulations, including the Companies Law, Securities Law, and Tax Ordinance, which impact financial reporting, disclosures, and auditing requirements.

Regulatory Oversight: The Israel Securities Authority (ISA) and the Israel Tax Authority (ITA) play significant roles in overseeing compliance with financial reporting and auditing standards, especially for publicly traded companies and entities subject to tax audits.

Convergence with International Standards : The IASB continuously works towards aligning Israeli GAAP with international standards, particularly International Financial Reporting Standards (IFRS), to enhance comparability and transparency in financial reporting.

At Meru Accounting, we transform businesses of Israel and its records in a systematic manner. Including reviewing and analysing indirect tax laws around VAT and its new updated rules and regulations. We understand GAAP requirements very carefully, by overseeing compliance with financial reporting and auditing standards.