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OrdinanceTax Law

Income Tax Ordinance [New Version]

פקודת מס הכנסה [נוסח חדש]

Published: 1961-04-25Last amended 2026-06-08✓ Amendment status checked against the Knesset legislation record on 2026-09-04
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Unofficial English translation — for reference only. It may contain errors or omissions and cannot be relied on as a legal text. Only the Hebrew text published in Reshumot is legally binding.More

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Despite these checks, it may contain errors, omissions, or imprecise renderings of legal terminology and cross-references, and it may not yet reflect the latest amendments. It cannot be relied upon as a legal text.

The Hebrew text as published in Reshumot (ספר החוקים) and on the Knesset website is the sole authoritative and legally binding version. In any discrepancy, the Hebrew text prevails.

This translation is provided for informational purposes only and does not constitute legal advice. For use in legal proceedings, request a certified Expert Legal Opinion.

Section A-1: Advance Payment in respect of Non-Deductible Expenses

Advance Payment in respect of Excess Expenditure§
181b.
(a)A body of persons that incurred, for the purposes specified in Regulations made under section 31, amounts that under those Regulations are not permitted as a deduction or that exceed the amounts prescribed as permitted deductions, or that incurred amounts in respect of expenditure whose deduction is not permitted under section 32(11) (in this Law – excess expenditure), shall pay to the assessing officer, at the prescribed time, an advance payment as set out below on the excess expenditure incurred, and shall submit to the assessing officer at that time a report, and shall also submit to the assessing officer an annual report detailing and summarising all the excess expenditure incurred in that year, all as prescribed:
(1)a body of persons to which section 3(g) applies – 90%;
(2)any other body of persons – 45%;

for the purposes of this section, "body of persons" – excluding a partnership in which there is no partner that is a body of persons to which this section applies.

(b)The provisions of subsection (a) shall not apply to amounts paid as employment income from which the person making the payment or the person responsible for the payment deducted tax pursuant to section 164.
(c)Where a body of persons did not pay the advance payment as referred to in subsection (a), or did not submit a report pursuant to that subsection, or submitted a report as aforesaid but the assessing officer has reasonable grounds to assume that the report is incorrect – the assessing officer may assess to the best of the assessing officer's judgment the amount of the advance payment that that body of persons is required to pay, and such an assessment does not exempt the body of persons from any other liability under this Ordinance; an assessment under this section shall have the same status as an assessment under section 145; the assessing officer may assess a person as aforesaid in this section during the period in which the assessing officer is entitled to determine, to the best of the assessing officer's judgment, the amount of the taxable income of that person for the tax year in which the advance payment was due.
Set-off Against Future Tax§
181c.

Where a body of persons to which the provisions of section 3(g) do not apply paid advance payments under section 181b for a particular tax year in an amount exceeding the amount of tax it is required to pay in that year, the excess amount shall not be refunded to it; however, if it is liable to tax, including betterment tax, in future years on its income from that business or occupation, the excess amount shall be set off against the tax or the betterment tax; the excess amount shall be adjusted according to the rate of increase of the index from the end of the tax year in which it arose until the end of the tax year in which it was set off.

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Section B: Dates for Payment of Tax

Payment upon Submission of Return§
182.
(a)A body of persons shall pay, at the time it submits the return under section 131, or the estimated return under section 133, the amount of tax due from it under that return.
(b)In respect of other taxpayers, excluding an individual at least 75% of whose income is taxable income under section 2, paragraphs (2) or (5), the Minister of Finance may prescribe, by Order, that a taxpayer to whom that Order applies is required to pay, at the time of submitting the return under section 131 or the estimated return under section 133, the amount of tax due from the taxpayer under that return.
Payment after Notice of Assessment§
183.

Where a notice of assessment under section 149 has been served on a person, that person is required, within 15 days of the date of service of the notice of assessment, to pay the balance of tax due from the person thereunder, and if the person has filed an objection under section 150 – the balance of tax that is not in dispute.

Payment after Objection§
184.

Where an amended notice of assessment under section 152(a), or an Order under section 152(b), has been served on a person, that person is required, within 15 days of the date of service of the notice or Order, to pay the balance of tax due from the person thereunder – and if the person has filed an appeal under section 153 – the balance of tax that is not in dispute.

Adjustment of Payment after Judgment§
185.

Where a decision of the District Court under section 156 or a decision of the Supreme Court under section 157 has been served on a person, the following provisions shall apply:

(1)if the taxpayer overpaid, the excess amount shall be refunded with linkage differentials and interest as their meaning in section 159a(a);
(2)if the taxpayer underpaid, the balance shall be paid within 15 days of the date of service of the decision, together with linkage differentials and interest as aforesaid, unless the court has determined otherwise, for the period from the date of filing the appeal until the date of the judgment.

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Section C: Interest and Fines

Interest on Deferral of Payment Dates§
186.

The assessing officer may, if given sufficient reason therefor, extend the dates for payment of the tax, in whole or in part, as prescribed under Section B, or the dates for payment of an advance payment, in whole or in part, under Section A, for such period as the assessing officer deems fit, provided that the taxpayer pays for the deferral period linkage differentials and interest as their meaning in section 159a(a).

Payment of Interest and Linkage Differentials§
187.
(a)
(1)On amounts of tax for a particular tax year that have not been paid by the end of the tax year, linkage differentials and interest as their meaning in section 159a(a) shall be imposed on the taxpayer for the period from the end of the tax year until the date of payment; in respect of a person who has a special assessment period, the end of the special assessment period shall replace the end of the tax year for this purpose;
(2)The provisions of this subsection shall also apply to a tax debt under section 159a(g).
(b)The provisions of subsection (a) shall not apply in respect of a period for which linkage differentials and interest are payable under section 185(2) or 186.
(c)
(1)On amounts of tax that were required to be deducted and were not deducted, or were deducted but were not transferred to the assessing officer at the time prescribed therefor, linkage differentials and interest as their meaning in section 159a(a) shall be imposed on the person liable for the deduction, for the period beginning on the 14th day of the month preceding the day on which the person was required to transfer the amounts deducted and did not transfer, or would have been required to transfer had the person deducted at the due time, until the date of their transfer to the assessing officer; however, if the amount liable to deduction does not relate to a specific date and is therefore fixed as a total amount for a particular period, the linkage differentials and interest shall be imposed for the period beginning at the midpoint of that period;
(2)Where the person liable for the deduction proves that the person from whose income the amounts that were not deducted should have been deducted included those amounts in a return on that person's income, the end of the tax year to which that return relates shall replace the date of transfer of the amounts to the assessing officer.
(d)On advance payments in respect of excess expenditure that were required to be paid under section 181b and were not paid to the assessing officer at the prescribed time, and which, had they been paid at the due time, could not have been set off against advance payments paid or tax paid in respect of that tax year, linkage differentials and interest as their meaning in section 159a(a) shall be imposed on the person liable, for the period from the end of the tax year until the date of payment.
Incentive for Early Submission of Return and Payment§
187a.
(a)A taxpayer who paid any amount on account of the tax due from the taxpayer for a particular tax year before the final date prescribed in section 132 for submitting the return under section 131 is entitled, in respect of that amount, to an exemption from the linkage differentials and interest applicable thereto under section 187(a), as set out below:
(1)on an amount paid by the end of the first month after the end of the tax year or the special assessment period (hereinafter in this section – the tax year) – full exemption from linkage differentials and interest;
(2)on an amount paid in the second month after the end of the tax year – exemption from half of the linkage differentials and interest;
(3)on an amount paid in the third month after the end of the tax year – exemption from one quarter of the linkage differentials and interest.
(a1)The Minister of Finance may by Order increase the exemption rates referred to in subsection (a).
(b)The relief under subsection (a) shall first be computed and the amount of the relief under the proviso to section 187(a)(1) shall be deducted from the balance of linkage differentials and interest.
(c)(Repealed).
Fine for Failure to Submit Return§
188.
(a)Where a person did not submit a return at the time prescribed in section 132, a fine of NIS 500 shall be imposed on that person for each month of delay.
(a1)Where a person did not detail in a return submitted under section 131 a transaction prescribed pursuant to that section as a transaction subject to reporting, the assessing officer may impose on that person a fine of NIS 500 for each month in which the person did not so report.
(b)(Repealed)
(c)Where a person did not submit a return at the time prescribed in sections 161 or 171, the assessing officer may impose on that person a fine of NIS 200 for each month of delay.
(d)Where a person did not submit at the due time a return from among the returns prescribed for the purposes of sections 164 to 166, a fine of NIS 200 shall be imposed on that person for each month of delay.
(e)In this section, "month" – a complete month.
(f)A person who is required to deduct tax at source from amounts paid by that person and who did not give the person from whose payments tax was deducted the forms evidencing the amounts paid to that person and the tax deducted, at the time prescribed therefor, the assessing officer may impose on that person a fine of NIS 100 in respect of each person to whom the form was not given.
(g)Where a person did not submit at the due time a return under section 135(1), a fine of NIS 200 shall be imposed on that person for each month of delay; however, if a date was initially set for submission of the return under section 135(1), and at that person's request a later date was subsequently set for submission of the return (hereinafter – the later date), and that person submitted the return after the later date, a fine of NIS 400 shall be imposed on that person for each month of delay commencing from the later date.
(h)On 1 January of each tax year the amounts specified in this section, as they were on 1 January of the preceding tax year, shall be adjusted according to the rate of increase of the index in the preceding tax year; where the income ceilings for a particular month under section 120b(b) have been adjusted, the Director may adjust in that month the amounts specified in this section as they were on 1 January of the tax year as if they were income ceilings.
(i)(Repealed)
Criminal Liability Preserved§
189.
(a)Payment of a fine under section 188 or an increase in tax rates under section 191b shall not derogate from a person's criminal liability under this Ordinance.
(b)Where a criminal prosecution has been brought against a person for failure to submit a return, that person shall not be charged with payment of a fine under section 188 for that offence, and if the person paid such a fine – it shall be refunded; where a criminal prosecution as aforesaid has been brought and the accused is acquitted, linkage differentials and interest as their meaning in section 159a(a) shall be paid to that person from the date of payment of the fine until the date of its refund.
Fine for late payment§
190.
(a)
(1)
(a)If a person is more than seven days late in paying an advance payment that he is liable to pay, or in paying part thereof, there shall be added to the amount in arrears a fine equal to linkage differentials and interest as their meaning in section 159a(a) (hereinafter – linkage differentials and interest) from the date fixed for payment until the payment of the amount in arrears, or until the end of the tax year in respect of which the advance payment was required, whichever is the earlier (hereinafter – the end of the fine period);
(b)To a fine as referred to in sub-paragraph (a) there shall be added linkage differentials and interest from the end of the fine period until the date of payment of the fine, and the fine shall be regarded as a tax debt for the purposes of section 195a;
(c)Notwithstanding the provisions of sub-paragraph (a), where the date for payment of an advance payment has been deferred under section 175(f), and a person is more than seven days late in paying an advance payment from the date fixed in section 175(a) or from the date fixed under section 175(b), and has not paid the advance payment by the date fixed in section 175(f), the fine shall be added to the amount in arrears in accordance with the provisions of sub-paragraph (a);
(d)Where a person has not specified the date for payment of the advance payment and as a result the advance payment was fixed as a total amount for the entire period, the date for payment shall be regarded, for the purpose of calculating the fine under this section, as the midpoint of the period in respect of which the advance payment was fixed;
(2)Where a person requested a reduction in the amount of his advance payments and it transpired, according to the return he submitted, that the tax according to the return exceeds the balance after the reduction, he shall pay on the amount of the reduction – but not more than on the difference between the amount he declared in the return and the balance of the advance payments after the reduction – linkage differentials and interest as their meaning in section 159a(a), commencing from the midpoint of the tax year or the special assessment period until the end of the tax year or the special assessment period, and in respect of a particular payment – until the date of payment, whichever is the earlier; for this purpose, if any amount has been paid on account of the advance payments, it shall first be appropriated on account of the balance;
(3)For the purpose of a reduction in the amount of advance payments as referred to in paragraph (2), in a particular tax year, not on account of a deduction by reason of participation in the financing of research and development carried out by another person under section 20a(a) or under any other law, and not on account of a credit for donations under section 46a or under any other law, the tax from which the taxpayer was exempted by reason of the said deduction or credit shall not be taken into account in the tax according to the return;
(4)A taxpayer who did not give notice of the commencement of an occupation or a change therein in accordance with section 134, and as a result was not required to pay advance payments as referred to in section 181, or as a result of which the amount of his advance payments was not increased as referred to in section 180, shall be charged linkage differentials and interest in respect of the determining period, on the full amount of the advance payments he was liable to pay or on the amount by which the assessing officer was entitled to increase his advance payments, as the case may be; for this purpose, "the determining period" – the period commencing at the midpoint of the period between the opening of the business or the change thereof and the end of the tax year or the special assessment period, and ending at the end of the said year or period, as the case may be;
(5)For the purpose of payment of linkage differentials and interest and for the purpose of the order of appropriation of payments under section 195a, linkage differentials and interest under paragraphs (2) to (4) shall be regarded as a tax debt, at the end of the tax year or the special assessment period, as the case may be.
(b)(Repealed)
(c)(Repealed)
(d)A fine imposed under this section shall not be regarded as part of the tax paid for the purpose of a claim for relief under any provision of this Ordinance.
Fine for unlawful set-off of tax withheld at source§
190a.

A person who set off against his advance payments a deduction at source for which he did not have written confirmation, or which was deducted outside the period permitted under section 177, shall be liable to a fine of three times the amount of the deduction unlawfully set off.

Fine for deficiency§
191.
(a)In this section –

"deficiency" – any of the following, as the case may be:

(1)the amount by which the tax that a taxpayer is liable to pay exceeds the tax he is liable to pay according to his return under section 131, or the amount of tax assessed under section 145(b) if he did not submit such a return, all as the case may be; for this purpose, "tax" – excluding the tax supplement;
(2)for the purpose of a tax supplement – the amount by which the tax supplement that a taxpayer is liable to pay exceeds the tax supplement he is liable to pay according to his return under section 131, or the amount of the tax supplement assessed under section 145(b) if he did not submit such a return, all as the case may be;

"tax supplement" – as its meaning in section 81b(a).

(b)A taxpayer in respect of whom a deficiency has been determined that exceeds 50% of the tax he is liable to pay, and who has not proved to the satisfaction of the assessing officer that he was not negligent in preparing the return he submitted or in not submitting a return, shall be liable to a fine at the rate of 15% of the amount of the deficiency.
(c)Where the Director, or a person authorised by him for that purpose, had reasonable grounds to believe that the deficiency was created wilfully and with the taxpayer's intention to evade payment of tax, double the fines specified in subsection (b) shall be added to the amount of tax which that taxpayer is liable to pay.
(c1)A taxpayer in respect of whom a deficiency has been determined in an amount exceeding NIS 500,000 per year, and the said deficiency exceeds 50% of the tax the taxpayer is liable to pay, the assessing officer may impose on him a fine at the rate of 30% of the amount of the deficiency if the deficiency arises from one or more of the following:
(1)the taxpayer did not report a transaction that was prescribed under section 131(g) as a transaction subject to reporting;
(2)the taxpayer acted in a particular matter contrary to an explicit and reasoned tax ruling, as defined in section 158b, that was given to him in that matter within the three years preceding the submission of the return under section 131, and did not report, on a form prescribed by the Director, that he acted contrary to the tax ruling in that matter;
(3)a tax arrangement that has been determined in a final assessment to constitute an artificial transaction, provided that the taxpayer did not report it, or a fictitious transaction under section 86;
(4)an opinion as defined in section 131d(a) which its recipient did not report as required in that section;
(5)a position subject to reporting as defined in section 131e(a) which its recipient did not report as required in that section.
(c2)Where a fine has been imposed as referred to in subsection (c1), no fine under subsections (b) or (c) shall be imposed in respect of the same deficiency.
(c3)Where an indictment has been filed against the taxpayer on account of one of the grounds listed in subsections (b) to (c1), he shall not be charged in respect of the same act with a fine on the deficiency, and if he paid a fine on the deficiency – the amount of the fine he paid shall be refunded to him, together with linkage differentials and interest as defined in section 159a(a) from the day of payment until the day of refund.
(d)For the purposes of sections 149–152, the addition of a fine for a deficiency under this section shall have the same effect as an assessment.
(e)On a fine imposed under this section after the 7th of Adar 5745 (28 February 1985), linkage differentials and interest shall be added from the end of the tax year in respect of which the return was submitted or the assessment was made under section 145(b), or from the 7th of Adar 5745 (28 February 1985), whichever is the later, until the date of payment of the fine, and the fine shall be regarded as a type of liability for the purposes of section 195a.
Fine for failure to withhold§
191a.

A person who, without reasonable justification, did not withhold the tax that he was required to withhold under sections 161, 164 or 170 shall be liable to a fine at the rate of 15% of the amounts he did not withhold.

Increase of tax rates on account of failure to keep books§
191b.
(a)A taxpayer who is required to keep account books for a particular tax year or part thereof and did not keep them, or kept them for only part of the period during which he was required to keep them, or did not base his return on account books, shall have added to the tax he is liable to pay for that year 10% of the taxable income in respect of which he is required to keep accounts; for each subsequent year in which he did not keep account books as aforesaid, 20% of such income shall be added, provided that a person who is required for the first time to keep books in a particular tax year and began keeping them after the date by which he was required to commence keeping them shall be subject to the said additions only in respect of the period during which he was required to keep the books and did not keep them.
(b)Where a taxpayer has been charged for a particular tax year with a tax supplement, the advance payments for the year in which the assessment was made in respect of that particular year shall be increased by 20% if the tax supplement was 10%, and by 40% if the tax supplement was 20%, provided that if he was also charged with a supplement in respect of the tax year by reference to which the advance payments were fixed, the rate of increase of the advance payment shall be reduced by double the rate of the tax supplement; this provision shall not apply if the taxpayer proved, to the satisfaction of the assessing officer, that in the tax year in which the said assessment was made he kept account books or was not required to keep them.
Fine for false entry§
191c.

A taxpayer who is required under the Director's instructions by virtue of section 130 to record, in respect of a buyer who paid in cash, the particulars of that buyer's identity according to an identification document presented, and who did not record them or recorded incorrect particulars, shall be liable to a fine of 5% of the amount of the sale in respect of which he contravened such an instruction, or a fine of 500 liras, whichever is the higher.

Director's authority to reduce interest or fine§
192.

The Director may reduce the rate of interest or linkage differentials and interest under sections 186, 187 and 190, and the amount of the fine under sections 188, 190, 190a, 191a and 191c, or waive them entirely, if it has been proved to his satisfaction that the delay that gave rise to the obligation to pay was not caused by an act or omission dependent on the will of the taxpayer; and the Director may, in his absolute discretion, reduce or waive as aforesaid if it has been proved to his satisfaction that the taxpayer did not know the exact amount of tax due from him before he submitted the return; however, the Director shall not be entitled to reduce the rate of interest or linkage differentials and interest under sections 186, 187 and 190 solely because the taxpayer duly paid his advance payments or the tax was duly withheld from him, or because he paid the tax due from him according to the return upon its submission.

Date for payment of interest, linkage differentials or fine§
192a.

The date for payment of interest, linkage differentials and interest or a fine that a taxpayer is liable to pay under this Ordinance is within thirty days from the date of dispatch of the notice of the liability therefor.

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