Capital Declaration
A capital declaration is submitted with the assistance of our firm’s tax department, reporting the taxpayer’s assets and liabilities as of a specific date requested by the Tax Authority, typically the end of the year (December 31). This report is known as a capital declaration.
The Tax Authority periodically requires taxpayers, usually every few years, to submit a capital declaration. This requirement applies to independent business owners and salaried company managers and is separate from the annual personal income tax report that every taxpayer must submit. The request for a capital declaration arises for various reasons, such as significant purchases or investments made by the taxpayer, including real estate acquisitions, business ventures, or company establishments. Our tax department assists taxpayers in preparing and submitting the capital declaration.
The capital declaration, submitted upon specific request from the Tax Authority, details the taxpayer’s assets as of a given date, deducting liabilities on that same date to determine the taxpayer’s net capital. The reported capital is based on the actual cost of assets, such as real estate, cash, savings plans, and loans granted by the taxpayer, offset by liabilities, such as bank loans and mortgages. The difference between the assets and liabilities reflects the declared capital, supported by appropriate documentation to substantiate the declaration.
The Tax Authority reviews the capital declaration by comparing it with previously submitted annual reports and deducting taxes paid over the relevant period. This comparison serves as an indicator of the taxpayer’s net income over the years, measured against the previous capital declaration. If unexplained discrepancies arise, even after accounting for living expenses and other factors, the Tax Authority may claim the existence of undisclosed income and demand additional tax on the unexplained amount. These discrepancies are typically attributed to open tax years rather than the years between the two declarations being reviewed, potentially resulting in a higher tax liability. Therefore, it is crucial to handle the capital declaration with professionalism and expertise.
Our tax department possesses the knowledge and expertise needed to assist with the preparation of capital declarations, ensuring that all assets and liabilities are reported accurately. Our team of expert accountants and tax advisors will work with the taxpayer to provide the best possible explanations, helping to avoid the issues described above.
An accountant from our firm will be happy to assist you with this service. Contact us today for a no-obligation consultation.
