Under Section 5 of the Companies Regulations (Fees), 2001, a company that has ceased operations and is in the process of voluntary liquidation is entitled to an exemption from unpaid annual corporate registration fees for the years after it ceased operations if it meets the conditions specified in the regulation (the “Fee Exemption”).

The Fee Exemption encouraged inactive companies to wind themselves up in voluntary liquidation in order to receive the Fee Exemption, which at times could reach thousands of ILS of accumulated annual fees. The Fee Exemption was set to expire on 31.12.2022, but has been extended until 15.2.2023.

The Fee Exemption may be requested by a company in voluntary liquidation per two alternative tracks:

The first alternative requires filing of:

1. Confirmation from the Israel Tax Authority that the company has not opened an income tax file or that it closed the file (classification 73) indicating the date the last file was closed (the confirmation will be given for a period of seven years prior to the date the certificate was issued);
2. Confirmation from the Israel Tax Authority that the company has not been listed as an entity with a debt according to the Value Added Tax Law, 1975, or that its listing as such was canceled (classification 09) and specifying the date on which the listing was canceled (the confirmation will be given for a period of seven years prior to the date the certificate was issued);
3. An affidavit signed by at least one company director stating the date on which the company ceased operations and that it does not maintain bank accounts (day, month and year must be noted). If the company never commenced operations, the date of incorporation of the company must be stated.

The second alternative requires filing of:

1. Instead of the certificates mentioned in sections 1 and 2 of the first alternative – confirmation from the company’s auditor of the date on which the company ceased operations and that it has submitted annual returns to the Israel Tax Authority according to Section 131 of the Income Tax Ordinance, 1961 for all tax years for which the company requests the Fee Exemption and that these tax returns included declarations that the company has ceased its operations;
2. A copy of the foregoing tax returns file-stamped with the Israel Tax Authority’s “Received” stamp. Alternately, a tax assessment or tax assessment summary may be submitted for each year for which the company requests a Fee Exemption. If the company’s income tax file was classified as inactive (classification 77), copies of the income tax returns do not need to be filed;
3. An affidavit as described in section 3 of the first alternative.

We invite you to consider whether your company meets the requirements of the Fee Exemption and whether your company can commence voluntary liquidation prior to expiration of the Fee Exemption.

We are at your service should you have any questions in this regard.

The content in this communication is provided for informational purposes only and is not intended to be comprehensive. It does not serve to replace professional legal advice required on a case by case basis. The firm does not undertake to update the information in this communication or its recipients about any normative, legal or other changes that may impact the subject matter of this communication.