V.A.T. is a form of indirect taxation that is added to almost every transaction; it is a tax that is imposed on the added value, and is one of the State of Israel’s main tax laws, because it is such a central tax that allows businesses to make their own assessments and to offset the tax that they paid against the tax that they owe and to transfer the balance, or to receive a refund from the Tax Authority. This situation allows V.A.T. offenses to be committed, and indeed V.A.T. offenses are comparatively common. There are two main types of V.A.T. offense, in terms of the severity of the potential sanctions. It should be 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 against the Value Added Tax Law
Offenses under the V.A.T. Law 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 instructions of the V.A.T. law, 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 a report, and/or filing a V.A.T. report late, administering account books in a way that does not comply with the instructions, or failure to administer account books at all.
Offenses of this kind are considered criminal offenses, but they are less serious; the V.A.T. law 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 a 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 Value Added Tax that it owes. Examples of substantive offenses are the offset, and/or distribution of fictitious tax invoices, concealing or destroying information or account books, deducting of input without accounting documentation, demanding private input to reduce the payment of V.A.T.
Substantive 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.
In the field of V.A.T. our firm helps businesses and assessees, financial institutions, real estate entrepreneurs, foreign and Israeli companies, both in the initial stages of putting together the transaction and in V.A.T. issues that concern the nature of payment demands, including taxation aspects of non-profits and financial institutions.
- Classification of transactions as taxable or non-taxable; reporting transactions from which input has been deducted for V.A.T.
- Legal counseling in assessment and audit processes, objections and appeals to the courts.
- Legal counseling in matters of V.A.T. liability in real estate transactions.
- Legal counseling in matters of V.A.T. liability, imposed on the import of services and intangible assets.
- Legal counseling to financial institutions and non-profits.
Professional legal counseling in the early stages of a process that might 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.