Will gov’t financially compensate Israeli businesses harmed by war?


The war is taking a heavy toll on the Israeli people and its economy. Many young men have been called up to the IDF meaning less personnel at work and less demand for products and services. Others have been placed on unpaid leave.

We have discussed some of the financial compensation procedures in recent articles. But many voiced concerns the compensation is insufficient and the shekel has been weakening as a sign of reduced confidence in the economy. Consequently, Prime Minister Benjamin Netanyahu mentioned on October 28 that he had told the Treasury and others to dig deeper into their pockets.

The result is an ongoing flurry of new announcements for Israeli businesses– we review some of them below, and more are expected. Given that nobody knows how long the war will last, it remains to be seen what needs to be ratified by the Knesset, what are the detailed conditions, and what will be the duration.

General response 

This is the title of a package announced October 19. New financial measures announced include: NIS 10 billion state-guaranteed loan fund; postponed payment of National Insurance by freelancers; accelerated payments by the government to suppliers; immediate indemnification for employers and freelancers for reserve duty days; postponed payment of VAT; licenses extended and fees postponed; acceleration of “negative income tax” social security payments for the lower paid. Other tax deadlines have already been postponed administratively and more postponements are expected.

For businesses up to seven km. from the front line and Ashkelon, the following was announced: full compensation for direct damage from a direct hit to buildings and equipment; full compensation for indirect damage such as salaries, loss of revenues, etc.

The scene where a rocket fired from Gaza into Southern Israel, hit and caused damaged in the southern Israeli city of Ashkelon, October 7, 2023. (credit: OREN BEN HAKOON/FLASH90)

For businesses throughout Israel the following was announced: full compensation for direct damage from a direct hit to buildings and equipment; and ongoing business support grants reflecting fixed costs and salaries, for businesses with revenues up to NIS 400 million that decrease by at least 25% in October monthly reporting or 25% in bi-monthly reporting. Taking the monthly reporting businesses, the grants would apparently be as follows:

Decrease 25%-40%: grant of 6% plus 60% of salaries (up to national average) multiplied by the decrease.

Decrease 40%-60%: grant of 9% plus 60% of salaries (up to national average) multiplied by the decrease.

Decrease 60%-80%: grant of 12% plus 60% of salaries (up to national average) multiplied by the decrease.

Decrease 80%-100%: grant of 18% plus 60% of salaries (up to national average) multiplied by the decrease.

Grants would be capped at NIS 300,000 if revenues are up to NIS 100m or NIS 900,000 if revenues are up to NIS 400m. There are indications these grant caps may perhaps be doubled, we await final details.

Grants for freelancers of up to NIS 300,000 may apparently also be available if there are no fixed costs or salaries.As for existing state-guaranteed loans, repayments may be postponed three months and part of the collateral may be released.

New five-year state-guaranteed loans of 4% of revenues, up to various limits, may be available for businesses up to 80 km. from the Gaza border, Northern frontier places and those whose owners were called up to the IDF. A repayment grace period of 3 – 12  months may be allowed.

Other support measures

Expedited down payment grants of up to NIS 500,000 may be available for frontline southern and northern businesses. Evacuated individuals can claim getting-organized grants of NIS 1,000 each or NIS 5,000 per family.

E-invoicing adoption is postponed by 3 months to March 31, 2024.

People wishing to arrange imports of protective and other equipment for soldiers should contact the Defense Ministry, tel: 073-353-888 or email: [email protected].

Soldiers returning from abroad to volunteer for the IDF may receive minimal national insurance support. If they don’t have an Israeli identity card, that must be arranged first.

Injured people and/or their families may apply to the National Insurance Institute depending on various things.

If employees from designated front line areas don’t show up for work due to the security situation, their employer may continue paying their salary and claim reimbursement, up to 250% of the national average salary e.g. if a Nahal Oz resident doesn’t show up for work in Tel Aviv. The system for employers to make such claims will be opened soon.

Rules for unemployment pay for laid off employees may be eased. People living within 4 km. of the Gaza border may claim compensation for damaged vehicles if they are moved to designated car parks to be assessed. If the owner doesn’t know where his vehicle is, the owner may claim anyway – Tel: 074-7617166 or on the Police website.

The Bank of Israel has issued guidance regarding a three month postponement of loan repayments for businesses and households. Nevertheless, banks and credit card companies apparently do not always apply uniform relief regarding bridging loans, mortgages, fees and credit limits.  Individual requests are suggested.

The Customs Authority is reportedly leaving transportation costs out of the value of imports for customs and import taxes.

As always, consult experienced professional advisers in each country at an early stage in specific cases.

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The writer is a certified public accountant and tax specialist at Harris Consulting & Tax Ltd.