What is a capital declaration? A capital declaration (hatsharat hon) is a very Israeli thing. It is a listing of personal assets and liabilities. Assets minus liabilities equals capital. This doesn’t mean you pay tax on reported assets themselves. Instead, a capital declaration is a device used by the ITA to spot someone with assets that may be generating unreported income.
How does it work? The ITA has broad powers to request (i.e., demand) a capital declaration, but it doesn’t demand one from everyone every year.
Instead, the ITA usually demands a capital declaration from people with a tax file every five to six years. People in business or holders of 10% or more of the shares of a company usually do have a tax file. So do beneficiaries of a trust.
Most employees don’t have a tax file, as tax is withheld at source from their salary, but employees who earn over NIS 721,560 (for 2025) are required to open a tax file and file annual tax returns.
What interests the ITA the most is the change from one capital declaration to the next. For example, Avi opened a new business in 2019. He received a demand to file a capital declaration listing assets and liabilities as of December 31, 2019, which showed capital (assets minus liabilities) of NIS 1 million.
In 2026, Avi received another demand to file a capital declaration as of December 31, 2025, which showed capital of NIS 10m. So, his capital rose by NIS 9m in the years 2020-2025.
The ITA and Avi will check that his reported income in those years totaled more than NIS 9m, regarding living expenses incurred, income tax paid, etc.
New immigrants arriving in 2026 face stricter foreign asset disclosure rules
Are olim exempt? New immigrants (olim) who took up Israeli residence before 2026 are exempt from disclosing foreign assets and need only report Israeli assets if requested. Full disclosure is required from immigrants who take up Israeli residence on or after January 1, 2026.
What is changing? The ITA has opened a website for online filing of capital declarations. Currently, taxpayers and their advisers may choose between filing capital declarations in paper format or online, if requested by the ITA. From January 1, 2027, all capital declarations must be filed online.
Does it matter? An online capital declaration is time-consuming. What takes time is uploading supporting documentation (purchase invoices or receipts) one by one for each asset or liability. This will make it easier for tax officials to verify each individual item. Until now, you could attach a bunch of supporting documents in one go.
In practice, most taxpayers lack some of the supporting documentation, e.g., for home improvements or household items, such as furniture, jewelry, artwork, etc. But if you don’t upload any documentation for an item, the ITA online system may stall in its tracks. And if you file something insufficient, such as a note from the taxpayer rather than a purchase invoice, tax officials may quickly spot this and ask questions.
Israeli taxpayers have 120 days to file capital declarations, with extensions possible
Deadline: You have 120 days to file a requested capital declaration, unless an extension is granted. But Israeli postal service delays may mean you may not get the capital declaration request in good time. If so, you can note the date of receipt and ask the ITA for an extension.
Comments: Care is needed with capital declarations. The ITA generally expects people with tax files to have purchase invoices for all items costing NIS 3,000 or more.
Israeli capital declarations require assets to be reported at cost, not market value
Note that assets should be listed at cost, not market value. For example, suppose your home cost NIS 2m a few years ago and is now worth around NIS 5m due to market movements and building permission to add an extra floor. You still list the home on the capital declaration at the cost of NIS 2m (plus the cost of any improvements). If you can’t find purchase invoices for household items, it is customary to ask your insurance company to carry out a survey.
Furthermore, suppose your portfolio of investments in pharma and tech hot stocks have risen in value on paper from a cost of NIS 2m. a few years ago at a market price of NIS 5m. on the capital declaration listing date – December 31 of whichever year. You list the investments at a cost of NIS 2m on the capital declaration.
Capital declarations should be taken seriously and dealt with promptly.
As always, consult experienced professional advisers in each country concerned at an early stage in specific cases.
leon@hcat.co
The writer is a certified public accountant and tax specialist at Harris Consulting & Tax Ltd.