Tax Optimization for Business in Israel: Accounting for Travel Expenses
The income of enterprises in Israel has a rather high tax burden. But at the same time, there are many ways to reduce tax payments by correctly accounting for the costs of doing business. Let’s look at this issue using the example of cost accounting that occurs during working trips around the country or abroad.
Perhaps there is not a single company that would not require the occasional business trip of business owners or employees of the company to go on business trips, but not everyone knows that travel expenses can be taken into account in order to optimize taxation.
The basic rules for planning a trip and accounting for expenses on it are quite simple:
You need to prepare for a business trip – it must without a doubt have a business goal.
According to the results of the trip, it is necessary to draw up a report to which all documents on travel expenses are filed.
At the stage of preparing the trip, provide documentation that confirms that the planned trip is indeed for business. Such documentation may be:
An invitation to participate in the negotiations of the host country, the activity of which coincides with the activity of an Israeli enterprise, i.e. sending side;
Information about the presentation for potential clients abroad;
Paid participation of an Israeli company in an exhibition in another country;
Information on the conclusion of a contract, or contract for the supply of goods or services of an Israeli company to a foreign client;
Information that the purpose of the trip is to study proposals for the necessary equipment or its direct purchase;
Other documents establishing or certifying a desire to establish civil law relations with foreign partners.
Following the trip, participants draw up a detailed report. The report describes that he who is such and such (full name, position), was on such and such a business trip, with such and such as the goal, for so many days. All cheques and expenses, evidence of the implementation of business activities on a business trip are filed with this report. It should be remembered that not all of the costs of a trip can be covered as direct expenses on a business trip.
The costs of acquiring airline tickets, travel by public transport, taxi, other transportation expenses for all trip participants to and from their destination;
Cost of hiring a house or staying at a hotel;
Per diem for all trip participants during a trip (expenses for food and financing of other personal needs).
Or, without writing down the cost items in detail, an enterprise can carry $125 per day, per person for travel expenses.
Moreover, in the framework of a business trip, there may be accompanying cost items that can also be taken into account in the framework of tax optimization:
expenses necessary to complete the business tasks of the trip: renting a room for presentations, negotiations, advertising expenses, expenses for participating in exhibitions, forums, conferences, arranging a stand at an exhibition, etc.;
expenses for telephone calls, other means of communication;
registration of entry permits (visas), compulsory insurance, other documented expenses associated with the rules of entry and place of stay in the business trip, including any fees and taxes payable in connection with such expenses.
When taking into account the costs of doing business and optimizing the tax burden, it must be remembered that the Israeli tax authorities very harshly punish enterprises if they suspect actions related to illegal tax evasion.
In order to most effectively use fiscal legislation for tax optimization, it is better to contact a professional. An experienced specialist, not only familiar with the Law, but also constantly monitors updates and amendments, and knows how to properly organize work with fiscal organizations and prevent accusations of tax fraud against the company.
So, we have outlined the possibility of accounting for expenses that arise in the framework of trips abroad, in order to reduce the fiscal burden. You can get acquainted with other examples of tax optimization from the practice of the audit company “Shmuel Brodecki Roe Hashbon” in our blog, in the article «Hiding taxes is more expensive than paying them!». We invite you to ask questions directly about your business as part of a free consultation.
This article is for general informational purposes only and does not replace expert advice.