The Ministry of Industry, Trade & Labor is expected in the next few weeks to present a master plan that will regulate small and mid-size company business activity. According to the proposal, any business whose annual turnover does not exceed NIS 20 million will be allowed to pay VAT upon receipt of payment, and not at the time of the business transaction ("cash basis"). At present, small companies often have to pay VAT on a transaction before they receive payment, which causes severe cash flow difficulties.
The highlight of the new bill is that it provides unemployment benefits for Israel's 247,000 self-employed. Up until now, only salaried workers were eligible, and Lahav, the association of the self-employed in Israel, has worked for many years to achieve equality for self-employed people.
Under the bill, a self-employed person will be eligible to pay into an unemployment savings fund, and will enjoy the same benefits as do salaried workers, including income tax benefits. The benefits are twofold: the allocation will be treated as a deductible, and drawing on the fund upon closure of the business will also be tax free.
The bill stipulates that the amount that can be paid into the fund will be limited, and that the money can be accessed only after the self-employed person has completely stopped working in his occupation, and has informed all the relevant authorities. Unemployment benefits can be drawn from the fund for up to six months.
"Globes" has learned that the new bill will include far-reaching incentives, which have so far only been available to large industrial plants; one example is accelerated depreciation.
The new bill will also include assistance to small and mid-size companies in government tenders, a great benefit, as the government is one of the largest consumers of services.
Lahav president Yehuda Talmon has led the campaign on behalf of small businesses for more than five years. He said: "The government's decision is a cause for celebration for the self-employed, most of who have small and mid-size businesses. After a long and arduous campaign, we have reached our goal and have proven that if you fight for something that is true, worthy and just, and you don't give up, at the end of the day you will triumph."
The Finance Ministry opposes the proposals. The ministry said, "The Israeli government operates a variety of assistance programs for small businesses. This new bill ignores these programs and is requesting billions of shekels without having a source for these funds."
Published by Globes [online], Israel business news - www.globes-online.com - on June 6, 2011
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