Israel is a developed country in the Near East, is bordered by the Mediterranean Sea, and attracts investors and businessmen with its vast economic connections, innovations in many promising areas of economy and excellent climate. Obligations to file financial statements and carry out audit of companies are fully met and controlled. An annual report presented to state authorities discloses all aspects of the company’s activity and all transactions in maximum detail.
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In Israel, all companies must file annual accounts in accordance with the Companies Law.
However, there are differences that depend on the form of incorporation of the enterprise:
I. An individual entrepreneur may keep accounting records of expenses, file simplified accounts, is allowed to not have an accountant on staff, but may not work with legal entities.
II. A private limited company must employ the accrual method of accounting, by using double-entry accounting, must have an accountant on staff and has the right to outsource accounting.
III. A public company must keep accounting records; financial accounting and reporting requirements are generally the same as those for private companies, the only difference being that a public company may offer its shares on an open market.
Once a year, a private limited company must prepare and file an annual report with the Ministry of Justice of Israel within 14 days after the annual general meeting of shareholders of the company.
A public company accounts to the Securities Authority, the stock exchange where the company’s securities are quoted, and to the Registrar of Companies in accordance with the requirements of the Companies Law, the Securities Law or any other law.
Accounts shall be filed electronically through the State Services Portal:
An annual report shall also be filed with the Tax Authority.
An annual report must contain:
Furthermore, an annual report contains a detailed analysis of the results of the enterprise’s activity disclosing the main financial indicators, sources of the company’s financing and liquidity of the corporation.
Israel uses its own accounting standards. The International Financial Reporting Standards (IFRS) apply to companies that are in a group of companies and must file consolidated accounts.
Statements must be kept in the registered office of the company for at least 7 years after the date of their preparation to be checked by the company’s directors and shareholders.
An inactive company may decide at a general meeting that it is not required to prepare statements.
A company must appoint an auditor to audit its annual financial statements and express opinion on them.
An auditor shall be appointed at each annual general meeting and shall hold this position until the next annual general meeting.
Audit in Israel is a legal requirement to all companies, except for individual entrepreneurs and small private companies whose turnover is under 106 shekels (ILS) per year.
Financial year is from 1 January to 31 December.
Annual accounts must be filed within 6 months after the date of the end of the reporting period, i.e. by 30 June, for all companies.
In the case of a delay in filing an annual report, sanctions apply: a penalty of 119 ILS and late payment fees.
Companies that have subsidiaries (where their ownership interest exceeds 50% of shares/stock) must prepare consolidated accounts in accordance with the International Financial Reporting Standards (IFRS).
A consolidated annual report shall contain: