Taxpayers must submit their tax return to the Tax Authority according to the applicable procedures, as all delay penalties will be applied from the day after the deadline for submission ("Application Date")

According to the law, the tax return must be submitted on the following dates;

  • Natural Persons: Before the first of April of each year
  • Legal Persons: Before the first of May of each year

The Tax Authority shall accept the tax return in question at the taxpayer's responsibility, and the taxpayer is committed to paying taxes due according to their tax return, on the same day it is submitted.

If, after assessing the supporting documents, the Authority suspects that the tax return is incorrect, it must conduct the examination, correct or amend the tax return, determine the taxable revenues and notify the taxpayer of such procedures. In this scenario, the Authority may not make or amend the assessment except within five years, starting from the expiry date of the tax return submission date period.

The taxpayer may challenge the tax assessment within 30 days from the date of its receipt. If no challenges are made, the assessment shall be deemed legally final.

Tax shall not be payable unless the assessment is final, specifying a clearly determined taxable amount, and notifying the taxpayer thereof, hence the applicability of delay penalties after this date shall be entitled.

Based on the above, the Authority cannot apply the delay penalty retroactively to the day following the deadline for submitting the tax return, but rather, they can only apply the penalty after the issuance of this final assessment.

Herein we refer to one of the cases handled by our office wherein the Authority had applied the delay penalty from the day following the deadline for the tax return submission, although a final assessment was not issued until later, since the tax return was amended upon agreement between the Authority and the individual within the Authority's internal committee.

The authority's decision was challenged on the ground that the estimated calculations cannot not be final in the event they are challenged, meaning that the tax amount cannot be due unless it has been agreed upon within the internal committee, through the issuance of the appeal committee's decision, or the issuance of a court ruling estimating the net profits of the taxpayer's activity, after the fulfillment of the above. This will be considered the 'final assessment' which delay penalties can then be applied thereafter.

Accordingly, The court ruled to annul the decision of the Appeal Committee, which calculated the penalty retroactively, and stated that the entitlement for the delay penalty must be equivalent to the delay period, calculated from the period of issuance of the 'final assessment'. This cannot be applied retroactively to the submission date of the tax return in question. Any other application of this legislation, would go against the principals of only applying penalties when the tax return is final, with a specific amount, and upon the notification of the tax payer, since these are the conditions for determining the delay fees. The court ruled in favor of this interpretation of the law.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.