Form 106 — Annual Income Tax Certificate

What is Form 106 and who is it relevant to?

Form 106 is an annual income tax certificate that the Israeli Tax Authority sends to residents of Israel who received income from employment, business, or other sources. This is not a form that you fill out — it is a document that the Tax Authority issues based on reports collected throughout the year.

In short, Form 106 is an annual summary of all income reported to the income tax authority. It serves as proof to the Tax Authority of the income you received, and also as a basis for calculating eligibility for a tax refund or additional tax payment.

Who needs Form 106?

• Self-employed individuals and business owners — if you worked during certain months of the year or throughout most of the year.
• Salaried employees — who received a salary slip from employment (usually from one or more employers).
• Owners of private limited companies and other entities — who received dividends or other income.
• Non-profit organizations — that reported income to the Tax Authority.
• New immigrants and foreign residents — whose information is under tax supervision in Israel.

If you are engaged in any business in Israel or received any income, it is very likely that you will receive Form 106 at the end of the year or at the beginning of the following year.

How Form 106 is Created — Step by Step

This is not a process that you manage directly. Instead, Form 106 is created from a collection of various reports gathered throughout the year. To better understand this, let's go through the steps:

1. Reporting from Employers and Income Sources — Every employer, independent contractor, or other income source reports to the tax authority on the income they paid you. For example, if you worked for an employer in 2025, the employer reports all the salary paid to you, national insurance, and deductions made.
2. Filing an Annual Report (for Self-Employed Individuals and Companies) — If you are self-employed or a company, you are required to file an annual report with the tax authority by a fixed date (usually several months after the end of the year). In this report, you declare income, expenses, advance payments you made, and more.
3. Data Storage in the Tax Authority's Database — All this information is collected by the tax authority in one system. This is where salary slips, employer reports, annual reports, VAT reports, and any other reported income source are consolidated.
4. Processing and Calculation of Form 106 — The tax authority processes all this information and creates Form 106, which summarizes all income collected regarding you. The form displays the total income amount, income sources, and deductions made.
5. Receiving Form 106 and Self-Reporting in the System — You will typically receive Form 106 through your personal account on the tax authority's website (or by mail, if you requested it). This usually happens at the beginning of the year following the reporting year (for example, Form 106 for 2025 will be received at the beginning of 2026).

What is important to remember: You do not fill out Form 106. It is a document that the tax authority issues to you based on the data collected. If there is an error in the form, you can file an objection with the tax authority.

What You Need to Know About Taxes and Reporting — Basic Principles

Form 106 is directly related to the calculation of your taxes. To understand why this is important, let's review some basic principles.

How Does Form 106 Affect Your Tax Calculation?

When the tax authorities calculate your taxes at the end of the year, they use Form 106 as a basic data point. The form shows your total income for the year. From this figure, the tax authorities deduct expenses (if you are self-employed or a company), various deductions, and exemptions to which you are entitled. The result is the tax you need to pay or tax refund that will be due to you.

For example: if you are an employee and received a salary of 60,000 shekels per year, and you were reported to income tax, your Form 106 will show 60,000 shekels. If the deductions made from your pay slips were too low, you may owe taxes. If the deductions were too high, you will receive a refund.

Tax Advance Payments and Form 106

If you are self-employed or own a business, you likely pay tax advance payments during the year. These advance payments are prepayments that the tax authorities require from you. At the end of the year, when your final tax is calculated, the tax authorities deduct the advance payments you have already made. If the advance payments exceed your final tax, you will receive a refund. If they are lower, you will need to pay the difference.

VAT Reporting and Form 106

If you are a licensed business operator (that is, a company or self-employed person reporting VAT), Form 106 will not show the VAT you collected or paid. VAT is reported separately in periodic reports to the tax authorities. However, your income on Form 106 may be adjusted according to your VAT obligations.

Common Mistake: Form 106 Does Not Equal the Tax You Must Pay

Many people think that the amount on Form 106 is exactly the tax they must pay. This is not correct. Form 106 shows income only. The actual tax depends on your expenses, the deductions you are entitled to, and the advance payments you have already made.

Common Mistakes and How to Avoid Them

Over the years, we have observed that our clients encounter similar mistakes regarding Form 106. Here are the most common errors and how to avoid them:

• Failure to review Form 106 upon receipt — Many individuals receive the form without verifying the accuracy of the reported data. If there is an error in the form (for example, reported salary you did not receive, or an incorrect amount), it may affect your tax calculation. Review the form immediately upon receipt and file an objection if there are errors.
• Failure to report income not appearing on Form 106 — If you received income from undeclared sources (i.e., without formal reporting), it will not appear on Form 106. You are still required to report it in your annual report or in an income tax return. Failure to report such income may result in penalties and interest.
• Confusing Form 106 with an annual report — Self-employed individuals and companies must submit an annual report, not just Form 106. The annual report is the document in which you report your income and expenses. Form 106 is merely a summary issued by the tax authority at year-end.
• Failure to retain copies of Form 106 — Keep a copy of your Form 106 for each year. You may need it in the future for audits, credit applications, or other legal matters.
• Misunderstanding the deductions shown on the form — Form 106 displays various deductions (national insurance, income tax, etc.). Some clients believe all deductions are income tax, but this is incorrect. Understand what each deduction represents.
• Delayed review of Form 106 before submitting your annual report — If you are self-employed or a company, review Form 106 before submitting your annual report. If there are errors in Form 106, it may affect your report.
• Failure to follow up on objections to Form 106 — If you filed an objection to Form 106 and the tax authority rejected it, you may still file an additional request or consult with a certified public accountant. Do not give up easily if you are confident there is an error.

When Should You Consult with an Accountant?

Form 106 may appear simple at first, but in certain circumstances it can become complex. Here are the cases where it is advisable to consult with an accountant:

If there is a discrepancy between Form 106 and your actual income — If the form displays an amount different from what you know you received, this is a sign of a problem. An accountant can help you understand what happened and file an objection if necessary.

If you are self-employed or own a business with multiple income sources — If you received income from different sources (self-employment, salary, dividends, etc.), Form 106 may be more complex. An accountant can verify that all income was properly reported.

If you are entitled to a tax refund — If you believe you are entitled to a tax refund, an accountant can help you calculate it precisely. For example, if you are an employee with professional expenses, you may be entitled to a refund.

If you are a new immigrant or foreign resident — If this is your first year in Israel, or if you are a foreign resident with income in Israel, taxation can be complex. An accountant specializing in this area can help.

If you received a notice or audit from the Tax Authority — If the Tax Authority has contacted you regarding Form 106 or your annual tax return, this is definitely the time to consult with an accountant. They can represent you and help you handle the audit.

Ben Or Kook Accountants offers a complimentary initial consultation. If you are unsure whether you need assistance, this is a good place to start.