Capital Statement — A Complete Guide for Freelancers and Employees

What is a Capital Statement and Who Does It Apply To?

A capital statement is a report you file with the tax authority in which you report capital assets you own on a specific date in the year. This is not a report on income, but rather on assets — money in a bank account, real estate, securities, and anything else of economic value.

Who is required to file? Generally, a capital statement is required from business operators (exempt operators and licensed operators), from private company owners, and from landlords with income above a certain amount. Employees may also be required to declare capital if they have substantial assets or if the tax authority requires it as part of an examination.

If you are a freelancer who has just opened a business, or an employee who has received an update from the tax authority, you will likely need to familiarize yourself with this matter. In short, a capital statement is how the tax authority monitors your assets, and in some cases, it serves to verify that your income corresponds to the growth in your assets.

When is a Capital Declaration Submitted?

This question comes up frequently because the deadlines are not always clear. Generally, a capital declaration is submitted as part of your annual report or as part of the annual statement to the tax authority.

If you are a business operator (exempt or licensed), the capital declaration should typically be included in an annual report submitted by the end of May of the year following the reporting year. For example, a capital declaration for 2025 will be submitted by the end of May 2026.

If you are an employee and have received a request from the tax authority to declare capital, the deadline will be specified in the request itself. Do not ignore it — late submission may result in penalties or issues in future audits.

Business operators who are required to declare capital must do so every year, even if the capital has not changed. This is part of your ongoing reporting obligations.

How to Fill Out a Capital Declaration — Step by Step

If you are declaring capital for the first time, do not worry. The process is relatively straightforward if you prepare the documents properly.

1. Gather documents: You need to prove the value of each of your assets. For money in a bank account — take a screenshot or statement from the bank as of the relevant date. For real estate — a registration certificate from the Land Registry. For securities — a report from your brokerage firm. Every asset deserves evidence.
2. Set a declaration date: Usually, the declaration date is on December 31st of the reporting year (or another date specified by a request from the tax authority). This is the date as of which you report the value of the assets.
3. Record each asset: List each asset separately — bank account, apartment, car, investments. Include the estimated value of each asset as of the declaration date.
4. Deduct liabilities: If you have debts (bank loans, mortgages), deduct them from the assets. A capital declaration is typically about net capital — assets minus liabilities.
5. Submit through the correct channel: Businesspeople typically submit the declaration as part of the annual report, through their accountant or through the government tax portal. Employees will receive specific instructions from the tax authority.

One point that is not always clear: if you are a licensed business operator required to submit an annual audit report, the capital declaration must be signed by a certified public accountant. If you are a exempt business operator, you can usually submit it yourself, but it is advisable to check with an accounting firm if there are any doubts.

What You Need to Know About Taxes and Capital Reporting

A capital declaration in itself does not directly "impose" taxes. That is, you do not pay taxes simply because you have capital. However, a capital declaration serves the tax authorities as a tool to check whether there is a discrepancy between your income and the growth of your assets.

For example, if you are a business owner reporting low income, but your capital declaration shows that your assets have grown significantly in the past year, the tax authorities may ask questions. This does not necessarily mean you have done anything illegal—you may have another source of income or received a gift—but it can lead to an investigation.

If you are an employee and declare substantial capital, it does not directly affect your income tax. However, if your capital generates income (for example, interest from a savings account or dividends from stocks), you must report this income separately.

What is important to remember: a capital declaration is a transparency tool. If you report honestly and have documents supporting the value of your assets, there is no problem. However, if there is a discrepancy between your income and capital, consult with a certified public accountant on how to align your reporting.

Common Mistakes and How to Avoid Them

In the years we have worked with business owners and employees, we have seen several recurring mistakes that are easy to avoid:

• Forgetting to declare small assets: Many people think that if an asset is small or "not material," they can skip a declaration. This is not correct. If you have a savings account in someone else's name or securities, they must be reported. The tax authority can learn about anything through banks and investment firms.
• Using incorrect valuation: Some of you use estimated or "approximate" asset value. This is not sufficient. If it is real estate, obtain an appraisal or use the value from the Land Registry. If it is stocks, use the value on the declaration date. Accuracy matters.
• Late filing: Deadlines are strict. If you are a business owner, the annual report with the capital declaration must be up to date. Late filing may incur a penalty from the tax authority. If you received a request from the tax authority, document the date and ensure you submit on time.
• Separation of personal capital from business capital: If you are a business owner, your capital as a "business owner" must be separated from your personal capital. If you have an apartment that is a personal asset and a shop that is a business asset, they must be reported separately in the report.
• Forgetting to deduct liabilities: If you have a mortgage on your apartment, do not report the full value of the apartment. Deduct the remaining mortgage balance. A capital declaration is about net capital, not gross assets.
• Inconsistency between years: If in one year you reported a certain asset and in the next year you "forget" it, that raises a red flag. The tax authority keeps records of declarations, and inconsistency may lead to inquiries.

When Should You Contact an Accountant?

A capital declaration does not always require an accountant, but there are situations where it is highly advisable:

You must contact one if: You are a licensed business owner required to file an audited annual report — your capital declaration must be signed by a licensed accountant. This is a legal requirement.

It is advisable to contact one if: You are a exempt business owner with complex assets (real estate in multiple locations, foreign investments, partnership interests), or if you have questions about how to report a specific asset. If you have received a request from the Tax Authority to declare capital and are unsure how to respond, this is the time to seek assistance.

If you are an employee and have received a request to declare capital, you can usually do so yourself if your assets are straightforward (bank account, apartment). However, if there is complexity — foreign real estate, investments in companies, or if you are uncertain about asset values — it is advisable to consult with someone knowledgeable.

In short: if you are in doubt, it is best to reach out. An error in a capital declaration can lead to an audit, and that is not something you want to handle on your own.

Field Examples

Example 1 — Exempt Business Owner with an Apartment: You are an exempt business owner who opened a business in 2024. At the end of 2024, you have a bank account with 50,000 NIS and an apartment share worth 500,000 NIS (but with a mortgage of 300,000 NIS). When you file an annual report in 2025, you must declare capital of 50,000 + (500,000 - 300,000) = 250,000 NIS. This is your net capital.

Example 2 — Employee Who Received a Request: You are an employee who received a letter from the tax authority requesting a capital declaration. You have a savings account with 100,000 NIS, shares worth 80,000 NIS (at fair value on the declaration date), and an apartment worth 600,000 NIS (with a mortgage of 200,000 NIS). Your net capital is 100,000 + 80,000 + (600,000 - 200,000) = 580,000 NIS. You report this in a statement submitted to the tax authority within the specified deadline.

Example 3 — Licensed Business Owner with a Company: You own a private company required to file an annual audited report. In addition to your personal assets (apartment, bank account), you also have assets in the company (inventory, equipment, company bank account). When you file an annual report, you must declare your personal capital separately and the company assets separately. A CPA will help you coordinate this properly.

When should you contact accountant Ben Or Kook?

A capital declaration is just one part of your tax reporting. If you are self-employed or an employee and have questions about how to declare honestly and without errors, it is time to get professional advice.

Ben Or Kook Accountants guide self-employed individuals and employees through complex processes like these. If you are uncertain about the value of your assets, if you have foreign assets, or if you are a licensed professional required to file a signed declaration — we are here to help.

Your first consultation with us is free of charge. During the meeting, we can explain exactly what you need to do, what documents you need to prepare, and how to avoid common mistakes.