Don’t mix business with volunteering activity


Israelis are mobilizing to help the war effort, especially regarding body armor and other shortages at the IDF. However, the Israeli government issued a press release cautioning about prosecution for someone who got it wrong.

According to the press release, an Israeli charity’s CEO was arrested and brought before a magistrates’ court. He was accused of making false declarations to the Customs Authority and smuggling equipment intended for donation.

He allegedly exploited the sensitive security situation to “obtain tax cover recognition” from the Tax Cover Committee at the Finance Ministry. This followed an investigation by an import supervision unit, and a drugs and customs unit at Ben-Gurion Airport. The judge released the suspect under restrictive conditions.

WILL BEN-GURION Airport return to its normally busy activity in the coming weeks and months? (credit: AVSHALOM SASSONI/FLASH90)

The press release statement explained that since the beginning of the Israel-Hamas war, the customs administration has released donated equipment for civilian aid as part of the war effort, with taxes being paid out of funds from the Tax Cover Committee.

A dedicated “war room” was established at the customs administration’s offices, where donations arriving from abroad are approved, subject to foreign and Israeli donors declaring that the donated items are not for sale.

In the case above, the Israeli individual allegedly made 22 false declarations regarding equipment, which he declared were intended for emergency standby squads. In practice, he purportedly illegally sold the equipment to soldiers and civilians. Doing so allegedly amounted to fraud, deception, and tax evasion.


This is strong stuff. The emergency standby squads of several kibbutzim fought valiantly and almost alone for many hours against Hamas on October 7. What is the problem?

A principal lesson is not to mix business with charitable, or voluntary activities. Selling counts as business. In short, sales equals trouble.

The Charities Registrar takes a keen interest in ensuring that charities keep to charitable objectives. Annual compliance reports must be filed by charities.

The Income Tax Ordinance’s (ITO) Section 9(2) defines an exempt “public institution” (as in a charity) in some detail as follows: a body of persons of at least seven, where a majority of the members are unrelated, which exist and operate for a public purpose, and file financial statements with the Israeli Tax Authority.

A public purpose is defined, moreover, as religion, culture, education, encouraging settling, science, health, welfare or sport, and any other purpose approved by the Finance Ministry. So, supporting the IDF or emergency standby squads needs finance committee approval.

The Value Added Tax Law essentially defines a nonprofit institution as a body of persons whose activity is not for the purposes of making a profit.

So normally, charities must stick to their stated approved objectives. However, a Justice Ministry’s instruction, dated October 10, 2023, allows a charity to carry out activities intended to provide immediate essential wartime aid similar to its stated objectives, without having to request a formal amendment to its objectives.

But the charity must pass a formal resolution to this effect, and it must be a charity, rather than a business selling donated items.

Some professional organizations are allowed to mix charitable with commercial-looking activities. For example, the Bar Association and the CPA Institute regulate the conduct of their members, charging fees for some of their publications and seminars. But they lose their tax exempt status if such businesslike revenues exceed 50% of their deductible expenses (ITO Sec 9(2A)).

Section 46 of the ITO enables the Israeli Tax Authority to regulate charities by stipulating various things, including how they should keep books. In return, donors get a tax credit, see below.

How to help?

Suppose you are not a charity but want to help. Consider physical activities free of charge, such as helping on farms or cooking food for soldiers and evacuees.

The Israeli CPA Institute has issued guidance saying that anyone wishing to arrange imports of protective and other equipment for soldiers should first contact the Defense Ministry, Tel: 073-353-888 or email: [email protected].

Alternatively, if you or your business want to make a monetary donation and get a tax credit of up to 35%, you should donate to a charity approved under ITO Section 46, and get an original or digitally signed receipt. The tax break is limited to donations of up to 30% of taxable income, at least NIS 200, but no more than NIS 10,019,808.But don’t mix business with voluntary activity.

As always, in specific cases, consult experienced professional advisers in each country at an early [email protected]

The writer is an accountant and tax specialist at Harris Consulting & Tax Ltd.