When is an accountant required?

When is an Accountant Required in Israel?

One of the most common questions among self-employed individuals, business owners, and companies is: Am I required to maintain accounts with a certified accountant? The answer depends on the type of entity you operate, the scope of your income, your business sector, and other legal and accounting parameters.

Ben Or Kook Accountants assists self-employed individuals and companies in Petach Tikva and Ramat Gan in determining their legal requirements and building customized accounting systems. On this page, you will find comprehensive information about when bookkeeping is mandatory, to whom it applies, and how to get started.

Main Categories: Who Needs an Accountant?

The requirement for bookkeeping and comprehensive financial record-keeping is regulated under Israeli income tax laws and other legislation. Generally, this obligation applies to:

• Limited Companies (Ltd.) — Every limited company is required to maintain comprehensive bookkeeping and an annual audit (subject to company size).
• Authorized Self-Employed Individuals — Self-employed individuals whose income exceeds a certain threshold or who have chosen this status.
• Associations and Public Entities — Required to maintain bookkeeping and annual financial reports.
• Exempt Self-Employed Individuals Under Certain Conditions — When they exceed the income threshold or conduct complex business operations.

Exempt Self-Employed Individuals — When Bookkeeping is Not Mandatory

An exempt self-employed individual whose income falls below a certain threshold is not required to maintain comprehensive bookkeeping, but must keep basic records of income and expenses. This is necessary to prove your income to the tax authorities in the event of an audit. Even though an accountant is not always mandatory, it is advisable to consult with an accountant when filing an annual report or when determining your business structure.

Conditions Requiring Bookkeeping

In addition to the type of entity, there are other conditions that may require comprehensive bookkeeping:

• Income Size — Self-employed individuals whose income exceeds a certain threshold must transition to authorized self-employed status or incorporate as a company.
• Number of Employees — Self-employed individuals employing workers must maintain accurate payroll records and pay stubs.
• Type of Activity — Businesses in certain sectors (banking, insurance, construction) are subject to stricter bookkeeping requirements.
• VAT — Self-employed individuals registered for VAT must file periodic reports and maintain detailed bookkeeping.
• International Business — Self-employed individuals conducting transactions abroad must maintain advanced bookkeeping and file special reports.

Audit Obligation — When is an Annual Audit Required?

An annual audit is an in-depth examination of financial statements by an independent accountant. It is a legal requirement for large companies, but not always mandatory for self-employed individuals.

Who Must Conduct an Annual Audit?

Private companies (Ltd.) that exceed certain thresholds in income, assets, or employees are required to conduct an annual audit. Additionally, companies engaged in regulated activities (such as banking or insurance) are subject to stricter audit requirements. Associations and public companies are generally also obligated to conduct annual audits.

Audit for Self-Employed Individuals — When is it Recommended?

Exempt self-employed individuals and authorized self-employed individuals are generally not required to conduct an annual audit, but it is recommended to perform an internal audit or accounting review if:

• The business is growing and is interested in external investments or bank loans.
• There is importance in maintaining a high level of credibility with banks or business partners.
• There is complexity in accounts or international transactions.

Types of Entities and Accounting Obligations

To understand when accounting management is mandatory, it is important to know the different types of entities in Israel and their requirements.

Exempt Self-Employed Individual

An exempt self-employed individual is a person who operates a small business independently with limited income. They are not required to maintain full accounting, but must keep basic records of income and expenses. A reduced annual report is usually sufficient.

Authorized Self-Employed Individual

An authorized self-employed individual is a self-employed person whose income exceeds a certain threshold or who has chosen to register as an authorized self-employed individual for VAT purposes. An authorized self-employed individual is required to maintain detailed accounting, file periodic VAT reports, and submit a full annual report. This is a mandatory legal requirement.

Private Company (Ltd.)

A private company (Ltd.) is a separate legal entity required to maintain full accounting, annual financial statements, and an audit (subject to company size). A company is also required to file an annual corporate tax return and pay tax on profits.

Association or Public Corporation

Associations and public bodies are required to maintain full accounting, prepare annual financial statements, and conduct an audit. Additionally, they are subject to special reporting to government authorities and to donors or stakeholders.

Comparative Table: When is Accounting Mandatory?

To clarify the statutory requirements clearly, here is a comparative table of entity types and their accounting obligations:

Important Note

The above table reflects general requirements subject to individual review of each case. Income threshold, number of employees, type of activity, and other factors may affect actual obligations. It is recommended to consult a professional accountant to determine your specific requirements.

How Much Does Accounting Cost with a CPA?

Accounting costs depend on many factors: business size, accounting complexity, number of monthly transactions, and degree of automation. Generally:

• Exempt business owners — relatively low cost, as documentation is less complex.
• Licensed business owners — moderate cost, depending on scope of activity.
• Companies — higher cost due to audit requirements and complex reports.

Ben Or Kouk offers a digital and accessible service, with personalized attention to each client. Service cost is tailored to your business size and required scope of accounting.

How Ben Or Kook Guides You in Determining Your Accounting Obligations

Ben Or Kook Certified Public Accountants assists business owners and companies in Petach Tikva and Ramat Gan at every stage of the journey. Whether you are starting a new business or managing an existing one, we are here to help you understand your legal obligations and build an appropriate accounting system.

Step 1: Initial Consultation at No Cost

During your initial consultation meeting, we understand your business type, expected revenue scope, number of employees, and special requirements. Based on this information, we determine your legal accounting obligations.

Step 2: Selecting the Appropriate Business Structure

If you are starting a new business, we help you choose the right business structure: exempt business owner, licensed business owner, or private company. This choice affects accounting maintenance obligations, costs, and protection of your personal assets.

Step 3: Establishing a Digital Accounting System

We build a digital and accessible accounting system that will enable you to manage your income and expenses easily. Our service includes support for record updates, invoice handling, expense management, and VAT documentation.

Step 4: Annual Reports and Tax Planning

At the end of the year, we prepare a comprehensive annual report, file it with the tax authority, and plan the coming year's tax. We also handle tax refunds if you are entitled to them.

Step 5: Ongoing Support and Consultation

Ben Or Kook offers continuous support throughout the year. If there are changes in your business, legal requirements, or tax planning, we are here to guide you and implement the necessary changes.