VAT is an indirect tax that is added to almost every transaction. It is a tax imposed on the value added in the transaction and constitutes one of the central tax laws in the State of Israel. Being such a central tax that allows traders to conduct a self-assessment and offset the tax they owe from the tax they have paid and transfer the balance or receive a tax refund from the Tax Authority, this situation allows for the commission of VAT offenses, and indeed offenses under the VAT Law are relatively common. Value-added tax offenses are divided into two main types in terms of the level of severity and potential punishment. It should be clarified that in any case, these offenses should not be taken lightly in terms of the consequences for those convicted of them.
It should be clarified that in any case, these offenses should not be taken lightly in terms of the consequences for those convicted of them. Therefore, it is recommended that anyone who gets into trouble use the services of a lawyer who specializes in VAT offenses.
Offenses under the Value Added Tax Law
Offenses under the VAT Law are divided into two groups, technical offenses and substantive offenses. Of course, there is significance in defining the type of offense you are accused of, and the type of offense also has a significant impact on the outcome of the legal proceedings against you.
In the case of technical offenses, these are cases in which a trader/taxpayer acted contrary to the technical provisions of the Value Added Tax Law, all without criminal intent or malice in his actions. Technical offenses refer to wrong conduct and their essence is not tax evasion. Examples of technical offenses are: failure to report/delay in reporting to the VAT, management of account books in a manner that does not comply with the provisions/failure to maintain account books at all, and more.
Offenses of this type are considered criminal offenses, but their severity is less. The Value Added Tax Law states that a person who commits a technical offense may be sentenced to up to one year in prison. The circumstances of the case have great weight in determining the sentence. If the omissions have been eliminated, the tendency will be not to impose a prison sentence but a fine and possibly a suspended sentence.
In the case of material offenses, these are cases in which a trader/taxpayer acted with criminal intent to evade or evade the payment of the tax he owes. Examples of material offenses are: offsetting/distributing fictitious tax invoices, concealing/destroying information or registers, deducting inputs without accounting documentation, requiring private inputs for the purpose of reducing VAT payment.
Substantial offenses are serious and the punishment for them may, under normal circumstances, reach a prison sentence of up to 5 years and, in serious circumstances, up to 7 years. A heavy fine will usually also be imposed on the perpetrator of such offenses.
In the field of VAT, the firm assists businesses and taxpayers, financial institutions, real estate developers, foreign and Israeli companies, both in the early stages of planning and structuring transactions and in VAT issues relating to the essence of payment requirements, including taxation aspects of non-profits and financial institutions.
- Classification of transactions as taxable or not, reporting of VAT input deduction transactions.
- Legal advice and support in assessment and review procedures, objections, and appeals to the Court of Appeal.
- Legal advice and support regarding VAT liability aspects in real estate transactions.
- Legal advice and support regarding aspects of VAT liability imposed on the import of services and intangible assets.
- Legal advice and support for financial institutions and non-profit organizations.
Professional legal advice in the early stages of the procedure may inevitably change the picture, whether the trader/taxpayer has been invited for an audit, whether an investigation has been opened against him or, God forbid, an indictment has already been filed against him. The classification of the offenses attributed is of great significance, with an emphasis on the element of intent, in the absence of which, as stated, the offenses and possible penalties may be lighter.
