Income tax is a direct tax imposed on the income of an individual or a corporation; the tax laws permit the deduction, from the income, of the expenses paid for the creation of that income, so that, in practice, the tax is imposed on the profit; other than deduction of the permitted expenses, there are situations when it is possible to offset losses from previous years, and there are also exemptions that may be realized. Income tax offenses are divided into two principal types, as far as the severity of the potential punishment is concerned; it is made clear that, in any event, these offenses should not be taken lightly in terms of the consequences for those who are convicted of them.
Offenses under the Income Tax Ordinance
Offenses under the Income Tax Ordinance are divided into two groups, technical offenses and substantive offenses; of course, the type of offense with which you have been charged is significant, and the type of offense also has a significant effect on the results of the legal process against you.
Technical offenses are cases where the business or assessee acted contrary to the technical provisions of the Income Tax Ordinance, but without any criminal or malicious intentions in his actions. Technical offenses relate to incorrect behavior and are not tax evasion. The following are examples of technical offenses: failure to file an annual report, and/or filing an annual income tax report late, lateness in submitting a declaration of capital, administering account books in a way that does not comply with the instructions, or failure to administer account books at all. Incorrect behavior in deducting tax at source, etc.
Offenses of this kind are considered criminal offenses, but they are less serious; The Income Tax Ordinance determines that whoever commits a technical offense may be sentenced to imprisonment of up to one year. The circumstances play a major role in determining the sentence and if the oversights have been removed, the tendency is not to impose a prison sentence, but rather an administrative fine, or possibly even a suspended sentence.
Substantive offenses are those in which the business or assessee acted out of criminal intentions to evade or escape paying the tax that it owes. Examples of substantiative offenses are deducting fictitious tax invoices, the concealment or destruction of information or account books, increasing expenses artificially, not reporting income, aiding and abetting another in tax evasion, etc.
Substantiative offenses are serious and the punishment for them might, under normal circumstances, reach imprisonment of up to five years, and in severe cases, up to seven years. Usually, a heavy fine will also be imposed on an offender of this sort.
It must be pointed out that in certain cases there is a possibility of paying a forfeit as an alternative to a criminal indictment, by submitting a well-reasoned application for a forfeit to the Israel Tax Authority; in the event that the application is accepted, a heavy fine will be imposed for those offenses as an alternative to criminal punishment and the deletion of the criminal record.
In the field of income tax, the firm helps businesses and assessees, individuals and companies in how to manage with tax assessors, throughout the country, on the following topics:
- Classification of income (earned income / capital gains income).
- Legal counseling in the assessment and audit processes, objections and appeals to the courts.
- Legal counseling on matters of deductions.
- Legal counseling on the rescheduling of debts and payments.
Professional legal counseling in the early stages of a process might inevitably turn into a game-changer, whether the business or the assessee has been invited to have his accounts audited, or if he is under investigation, or if an indictment has already been served against him. The classification of the alleged offenses is of great importance, with emphasis on intention, without which, as stated above, the possible offenses and punishments might be less severe.