Tax Planning for Companies — What Should You Check?

Why Is Corporate Tax Planning So Important?

Business owners in Israel face complex corporate taxation. It is not just about paying the amount owed — it is about understanding the opportunities that can save your company significantly over the course of a year.

Most business owners we meet in Petach Tikva and Ramat Gan come to us at a late stage: after they have already filed an annual report, or when they are planning for the next year and want to do it wisely. The problem is that tax planning that is not planned in advance — is planning that barely exists.

What is important to remember: corporate tax planning is not evasion. It is an understanding of the laws and their proper application so that the company pays only what is owed to it — not less, not more.

The Three Major Issues in Corporate Tax Planning

When we speak with a new business owner, we examine three layers: income tax, VAT, and national insurance. Each one can significantly impact the final outcome.

1. Corporate Income Tax

This is the largest of the three. A company pays tax on its profit — but what is considered "profit"? This is where expenses, depreciation, deductions, and exemptions recognized by the tax authority come in. A company that does not plan its expenses in advance, or that does not maintain proper records, may end up paying too much.

Concrete example: a company established in the first half of the calendar year may be entitled to a certain tax deduction in the year of establishment. But only if it files a proper annual report. If it does not plan ahead, it may miss out on this.

2. VAT — Reporting and Refund Rights

If the company pays VAT, it must file periodic reports (monthly or quarterly, depending on the scope). The critical point: VAT that the company pays to its suppliers — it can reclaim from the tax authority, provided it maintains proper documentation.

Many companies mistakenly pay VAT on transactions exempt from it, or they do not retain invoices correctly. Proper tax planning means clear reporting and accurate documentation, so you do not pay VAT that you should not or are unable to reclaim.

3. National Insurance and Employer Contributions

If the company employs workers, it must pay employer contributions and national insurance. These are not insignificant. For an employee on average salary, employer contributions can amount to tens of percent above the salary itself. Proper planning of salary structure and benefits can save considerably.

Corporate Tax Planning Review Process — Step by Step

When we begin working with a new client, we go through a proven systematic process. This is not a standard review — it is a review tailored to the company's specific situation.

1. Understanding the company's structure and operations: What does the company do? Who are its clients? Does it pay VAT? How many employees does it have? Every detail affects the planning.
2. Review of previous financial statements: If the company has been operating for several years, we review the filed reports. Are there patterns? Are there unrecognized expenses? Was VAT reporting accurate?
3. Calculation of projected cash flow: We estimate revenues and expenses for the coming year and calculate how much tax and national insurance the company will need to pay each quarter.
4. Identifying opportunities: Are there expenses that were not recognized previously? Are there exemptions the company has not utilized? Is the employee compensation structure optimal?
5. Action planning: We create a clear plan: which documents need to be retained, reporting frequency, which payments and when.
6. Implementation and monitoring: We assist in preparing reports, filing with the tax authority, and monitoring changes throughout the year.

All of this together is real corporate tax planning. This is not about complete independence of the company, but rather a collaborative partnership in which we serve as advisors.

Common Mistakes in Corporate Tax Planning — and How to Avoid Them

In our work with companies in Petah Tikva and Ramat Gan, we see the same mistakes repeated. Here are the most common ones:

1. Delayed Documentation

A company that does not keep invoices or receipts on time — is in trouble. When December arrives, it is very difficult to reconstruct what happened in January. Proper documentation must be ongoing.

2. Confusion Between Personal Expenses and Business Expenses

Business owners and small companies sometimes pay personal expenses through the company account — gas, food, or even vacations. The Tax Authority does not recognize these expenses as company expenses. This can significantly increase your tax liability.

3. Forgetting VAT Reporting

A company that pays VAT but forgets to file reports on time — may face penalties and interest. Additionally, it may miss an opportunity to recover VAT it has accumulated.

4. Failure to Plan Advance Payments

Many business owners are surprised when summer arrives and realize they need to make a large advance payment. If they had planned ahead, they could have prepared.

5. Using Too Low a Salary for Owners

A company whose owner withdraws profits without taking a salary — pays corporate tax on all profits. If the owner had paid themselves a reasonable salary (as an employee), they could have reduced the taxable profit.

Corporate Tax Optimization — Where to Start?

Tax optimization does not mean evasion or fraud. It means understanding the laws and using them so that the company pays exactly what it owes — no less, no more.

The first point: A company that wants to plan its taxes should start with proper financial management. This is not the end — it is the beginning. When all income and expenses are properly documented, it is much easier to identify opportunities.

The second point: Tax planning should be ongoing, not one-time. Every three months, or at least every six months, it is worthwhile to do a small review. Are we still on track with our plan? Are there changes that need correction?

The third point: You need to work with someone who knows. You should not try to do it yourself. An accountant who specializes in companies knows about exemptions, discounts, and reports that small companies are not aware of.

When Should You Consult an Accountant for Corporate Tax Planning?

If you are a business owner, it is advisable to consult with an accountant in these cases:

• You are new to the corporate world: If this is your first or second year as a company, it is highly advisable to receive professional consultation from the start.
• Your company is growing: As your company grows, tax complexity grows with it. New expenses, new employees, possibly new branches — all of this changes the planning.
• There are significant changes: If your company purchased an asset, took out a loan, or changed its capital structure — this is a good time to consult.
• You want to reduce taxes intelligently: If you hear about planning options that other companies use, it is worth checking whether they are relevant to you.
• The annual report is approaching: It is not advisable to wait until December. It is advisable to begin discussions with an accountant in the first half of the year.