Legal notice
This is a free information tool operated by an AI model. It explains the tax rules and helps you organise your own figures. All of its outputs are produced automatically by an AI model, with no involvement, review, or approval by a tax adviser or accountant. The output is not a tax opinion, not a return prepared by a licensed representative, and not professional advice, but a general calculation and explanation only: it does not examine the full extent of your income or your complete documents. An AI model may err, omit data, or present a wrong conclusion.
Any form or text this tool produces is an automatic draft for your personal preparation only, and is not a filed return. Responsibility for reporting and for paying the tax is yours, the binding computation is the Tax Authority's, and representation before the Tax Authority is reserved to those permitted by law. This tool is not a substitute for advice that takes account of the particular circumstances and needs of each person. Consult a tax adviser or accountant before filing or paying. All use of its output is the user's sole responsibility.
Instructions
Step 1: Identify the Business Type and Reporting Period
Determine the business entity type before generating any report. Each type has different reporting requirements under Israeli law:
- Osek Patur (Exempt Dealer): Simplified reporting, no VAT collection. Annual turnover must stay under the exempt ceiling, which is 122,833 NIS for 2026. Files an annual declaration (Hatzharat Osek Patur) by around 31 January for the prior calendar year, not periodic VAT reports. Exceeding the ceiling mid-year forces conversion to Osek Murshe at the regional VAT office. Reports focus on income summary.
- Osek Murshe (Licensed Dealer): Full VAT reporting required bi-monthly when annual turnover is up to 1,775,000 NIS (the 2026 figure; it was 1,725,000 NIS in 2025, and it rises to 1,805,000 NIS from 1 January 2027), and monthly when turnover exceeds it. Must produce profit and loss, and submit VAT returns.
- Chevra (Company): Full financial statements required including balance sheet, profit and loss, cash flow statement, and notes to financial statements. Subject to Companies Law 1999 and Securities Authority requirements if public.
Confirm the reporting period: monthly, bi-monthly (for VAT), quarterly, or annual.
Alongside VAT, an Osek Murshe or Chevra typically also files periodic income-tax advance payments (mikdamot, usually a percentage of turnover set by the Tax Authority) on the same gov.il portal. A self-employed osek separately pays periodic National Insurance (Bituach Leumi) contributions on their own account, a distinct mandatory obligation from VAT and the income-tax mikdamot. This skill produces the financial figures behind those reports; it does not perform the advance filing itself.
Step 2: Gather Financial Data
Collect the following data sources:
-
Chart of Accounts (Matkonit Cheshbonot): A common chart-of-accounts convention (Israel has no single mandated SME numbering scheme). For filing, map accounts to the official Form 6111 field structure per the ITA 6111 form and its instructions (https://www.gov.il/he/service/itc6111), confirming the year-specific field codes there:
- 1xxx: Assets (Rechush)
- 2xxx: Liabilities (Hitchayvuyot)
- 3xxx: Equity (Hon Atzmi)
- 4xxx: Revenue (Hachnasot)
- 5xxx: Cost of Goods Sold (Olut HaMecher)
- 6xxx: Operating Expenses (Hotzaot Tifuliyot)
- 7xxx: Financial Income/Expenses (Hachnasot/Hotzaot Mimun)
- 8xxx: Other Income/Expenses (Hachnasot/Hotzaot Acherot)
- 9xxx: Tax and Adjustments (Mas VeHitamot)
-
Transaction Journal (Yoman Peulot): All posted transactions for the period.
-
Opening Balances (Yitrot Pticha): Carried forward from previous period close.
-
VAT Records: Input VAT (Maam Tsumot) and Output VAT (Maam Iskaot) for the period.
Step 3: Generate the Trial Balance (Maazan Bochein)
Produce a trial balance that lists all accounts with their debit and credit balances:
Maazan Bochein / Trial Balance
Period: January - December 2025
Currency: NIS (New Israeli Shekel)
Account | Account Name | Debit (NIS) | Credit (NIS)
---------|------------------------|-------------- |--------------
1010 | Cash (Kupah) | 45,230.00 |
1020 | Bank Leumi (Current) | 328,750.50 |
1030 | Accounts Receivable | 125,400.00 |
2010 | Accounts Payable | | 89,200.00
2020 | VAT Payable | | 12,350.00
3010 | Owner's Equity | | 200,000.00
4010 | Service Revenue | | 650,800.00
5010 | Direct Costs | 180,000.00 |
6010 | Salaries (Maskorot) | 195,000.00 |
6020 | Rent (Schar Dira) | 48,000.00 |
6030 | Office Expenses | 15,200.00 |
7010 | Bank Charges | 3,800.00 |
9010 | Income Tax Provision | 10,969.50 |
| TOTALS | 952,350.00 | 952,350.00
Verify that total debits equal total credits. Any imbalance indicates posting errors that must be resolved before proceeding.
Step 4: Generate the Profit and Loss Statement (Doch Revach VeHefsed)
Structure the P&L according to Israeli format:
Doch Revach VeHefsed / Profit and Loss Statement
For the Year Ended December 31, 2025
(Amounts in NIS)
Current Year Previous Year
----------- ------------
Revenue (Hachnasot):
Service Revenue 650,800.00 580,200.00
Other Revenue 8,500.00 5,100.00
----------- ------------
Total Revenue 659,300.00 585,300.00
Cost of Revenue (Olut HaMecher):
Direct Costs (180,000.00) (155,000.00)
----------- ------------
Gross Profit (Revach Golmi) 479,300.00 430,300.00
Operating Expenses (Hotzaot Tifuliyot):
Salaries and Benefits (195,000.00) (175,000.00)
Rent (48,000.00) (48,000.00)
Office and General (15,200.00) (12,800.00)
Depreciation (Pachat) (22,000.00) (20,000.00)
----------- ------------
Total Operating Expenses (280,200.00) (255,800.00)
Operating Profit (Revach Tifuli) 199,100.00 174,500.00
Financial Expenses (Hotzaot Mimun):
Bank Charges (3,800.00) (3,200.00)
Interest Expense (6,500.00) (5,800.00)
----------- ------------
Profit Before Tax (Revach Lifnei Mas) 188,800.00 165,500.00
Income Tax (Mas Hachnasa) (43,424.00) (38,065.00)
----------- ------------
Net Profit (Revach Naki) 145,376.00 127,435.00
Apply the current Israeli corporate tax rate (23% as of 2026) for Chevra entities. For an Osek Murshe or other non-corporate entity, the profit flows to the owner's personal income tax: use the current income-tax bracket table (see Kol Zchut, Madregot Mas Hachnasa) rather than a single rate, and note that the high-income surtax (Mas Yasaf) applies on top of the regular brackets for high earners. Do not hardcode a stale bracket table; pull the live figures from the source.
Osek zeir (small-business) election: a registered osek zeir (turnover up to the same 122,833 ceiling) is entitled to deduct a flat 30% of turnover as expenses INSTEAD of claiming the expenses actually incurred (it replaces actual expenses; it is not added to them), and in most cases this also exempts them from filing an annual income-tax return. Ask which basis the user is on: for an osek zeir on the 30% basis, do NOT tax the actual P&L profit above, tax turnover minus the 30% deemed deduction.
Step 5: Generate the Balance Sheet (Maazan)
Structure according to Israeli format with assets on one side, liabilities and equity on the other:
Maazan / Balance Sheet
As of December 31, 2025
(Amounts in NIS)
ASSETS (RECHUSH) Current Year Previous Year
Current Assets (Rechush Shotef):
Cash and Cash Equivalents 45,230.00 38,500.00
Bank Accounts 328,750.50 275,100.00
Accounts Receivable (Chayavim) 125,400.00 110,200.00
Prepaid Expenses (Hotza'ot Merosh) 12,000.00 10,000.00
----------- ------------
Total Current Assets 511,380.50 433,800.00
Non-Current Assets (Rechush Lo Shotef):
Equipment (Tziud) 180,000.00 160,000.00
Less: Accumulated Depreciation (62,000.00) (40,000.00)
Intangible Assets 25,000.00 30,000.00
----------- ------------
Total Non-Current Assets 143,000.00 150,000.00
TOTAL ASSETS 654,380.50 583,800.00
LIABILITIES AND EQUITY (HITCHAYVUYOT VEHON ATZMI)
Current Liabilities (Hitchayvuyot Shotfot):
Accounts Payable (Zakaim) 89,200.00 75,400.00
VAT Payable (Maam Leshalem) 12,350.00 10,800.00
Accrued Expenses (Hotzaot Leshlem) 18,500.00 15,200.00
Income Tax Payable 43,424.00 38,065.00
----------- ------------
Total Current Liabilities 163,474.00 139,465.00
Non-Current Liabilities:
Long-term Loan (Halva'a LeZman Arokh) 145,530.50 144,335.00
----------- ------------
Total Liabilities 309,004.50 283,800.00
Equity (Hon Atzmi):
Share Capital (Hon Minayot) 200,000.00 200,000.00
Retained Earnings (Revachim Tzvurim) 145,376.00 100,000.00
----------- ------------
Total Equity 345,376.00 300,000.00
TOTAL LIABILITIES AND EQUITY 654,380.50 583,800.00
Step 6: Generate the Cash Flow Statement (Doch Tazrim Mezumanim)
Use the indirect method as standard in Israeli reporting:
- Operating Activities (Peulot Shototfot): Start with net profit, adjust for non-cash items (depreciation, provisions), and working capital changes.
- Investing Activities (Peulot Hashkaa): Capital expenditures, asset sales, investment purchases.
- Financing Activities (Peulot Mimun): Loan proceeds/repayments, equity contributions, dividend payments.
Indirect-method cash flow for the Step 4-5 business (NIS):
Doch Tazrim Mezumanim / Cash Flow Statement (indirect method)
Operating Activities:
Net Profit 145,376
Add: Depreciation (non-cash) 22,000
Increase in Accounts Receivable (15,200)
Increase in Accounts Payable 13,800
Increase in Accrued + Tax Payable 8,659
Increase in VAT Payable 1,550
Increase in Prepaid Expenses (2,000)
----------
Net Cash from Operating 174,185
Investing Activities:
Purchase of Equipment (20,000)
Disposal of Intangibles (at book value) 5,000
----------
Net Cash from Investing (15,000)
Financing Activities:
Net Loan Proceeds 1,195.50
Dividend Paid (100,000)
----------
Net Cash from Financing (98,804.50)
----------
Net Increase in Cash 60,380.50
The 5,000 decrease in intangibles is shown as a disposal at book value (no gain or loss, so no P&L line). If the decrease is amortisation instead, record it as an expense in the P&L and add it back in operating activities; confirm the cause with the user.
This cash flow is derived from the Step 4 P&L and the Step 5 balance sheet. Tie-out check (mandatory before output): the net increase in cash must equal the change in balance-sheet cash and bank, here (45,230.00 + 328,750.50) - (38,500.00 + 275,100.00) = 60,380.50. If it does not tie, a balance-sheet movement is missing from the statement. The Step 3 trial balance is a separate illustration and does not reconcile to Steps 4-6.
Step 7: Generate VAT Summary Report (Doch Maam)
For Osek Murshe and Chevra, prepare the VAT summary:
VAT Summary Report (Doch Sikum Maam)
Period: November - December 2025
Business: Example (individual Osek Murshe, not a PCN874 detailed filer in 2025)
VAT Registration: 515-123456
Output VAT (Maam Iskaot):
Taxable Sales 185,400.00
VAT at 18% 33,372.00
Input VAT (Maam Tsumot):
Purchases and Expenses 98,200.00
VAT Claimed 17,676.00
VAT Payable (Maam Leshalem): 15,696.00
Due Date: January 19, 2026 (online; 15th for paper)
Input VAT is the actual VAT on valid documents, not 18% of total purchases. Sum the VAT shown on the supplier tax invoices (and import entries) for the period. Purchases from an osek patur, and exempt or zero-rated purchases, carry no deductible input VAT. The VAT regulations (Takanot Maam) limit or bar deduction for some expense types, such as private-use vehicles, mixed business/private items, and entertainment and gifts; apply those restrictions and confirm the deductible share with the user's accountant. Report zero-rated sales separately from standard-rated sales. The example figures above assume every purchase is fully deductible.
Reporting cadence and deadlines: the online (mekuvan) filing deadline is the 19th of the following month; paper filers must file by the 15th. Detailed (PCN874) filers get until the 23rd.
Detailed VAT reporting (PCN874): as of 1 January 2026, a self-employed/individual Osek with annual turnover above 500,000 NIS must file the detailed PCN874 report (companies and partnerships with a corporate partner have been required since September 2025). Detailed filers face a 23rd-of-month deadline and per-period detailed reporting; whether the cadence is monthly or bi-monthly depends on the filer's existing classification (sources differ, so confirm against the filer's own VAT registration). The file lists per-invoice detail: invoice number, date, amount, VAT amount, and the counterparty's Osek (registration) number. From 2026, a self-employed detailed filer may aggregate (rather than itemize) tax invoices under 5,000 NIS pre-VAT as long as the combined total is stated.
Allocation-number (mispar haktza'a) gate on input VAT (Israel Invoice Model, 2026): input VAT on a tax invoice (issued by an osek murshe) ABOVE the threshold is NOT deductible unless the invoice carries a valid Tax Authority allocation number. Threshold (pre-VAT): NIS 25,000 at the reform's first stage (2024), NIS 20,000 during 2025, NIS 10,000 from 1 January 2026, and NIS 5,000 from 1 June 2026. Apply the threshold in force on the invoice date, so a Nov-Dec 2025 period (as in the example above) uses NIS 20,000. Before summing Input VAT (Maam Tsumot) for the period, verify that every above-threshold supplier invoice has a valid allocation number and EXCLUDE the input VAT of any that do not. Otherwise the VAT summary overstates the deductible input VAT and understates the VAT payable, a real 2026 compliance error.
Step 8: Format and Export
Apply proper formatting for all reports:
- Currency: NIS amounts with thousands separator (comma) and two decimal places: 1,234,567.89
- Negative amounts: Use parentheses for negative values: (45,000.00)
- Bilingual headers: Include both Hebrew and English section headers
- Comparison columns: Current period alongside previous period
- Unaudited output: statements this skill produces are unaudited compilations. Never label them "audited", and never add an auditor's report or opinion.
- Export formats: PDF (for your accountant's review), Excel (for analysis), CSV (for import into accounting software)
Examples
Example 1: Bi-monthly VAT Report for Osek Murshe
User says: "Generate my VAT report for the Jan-Feb 2025 bi-monthly period. I am an Osek Murshe. My sales were 120,000 NIS and my deductible purchases were 45,000 NIS."
Actions:
- Confirm business type as Osek Murshe (bi-monthly VAT filing).
- Calculate Output VAT: 120,000 x 18% = 21,600 NIS.
- Calculate Input VAT: 45,000 x 18% = 8,100 NIS (assumes the user's figure is already the deductible purchases and every invoice above the NIS 20,000 allocation threshold of that period (2025) carries an allocation number; otherwise apply the Step 7 rules).
- Calculate net VAT payable: 21,600 - 8,100 = 13,500 NIS.
- Generate formatted bilingual VAT summary report with due date (March 19, 2025 (online; 15th for paper)).
Result: A formatted VAT summary report showing 13,500 NIS payable to the Tax Authority (Rashut HaMisim), with bilingual headers and proper NIS formatting.
Example 2: Annual Financial Statements for a Chevra
User says: "Prepare the full annual financial statements for my company for 2025. I have my trial balance data ready."
Actions:
- Import trial balance data from the user's source.
- Verify trial balance balances (debits = credits).
- Generate Profit and Loss statement with current year vs. previous year comparison.
- Generate Balance Sheet with proper asset/liability/equity classification.
- Generate Cash Flow Statement using indirect method.
- Apply 23% corporate tax rate to calculate tax provision.
- Map the statements to Form 6111, the Israel Tax Authority structured annex (balance sheet, profit and loss, and tax-adjustment report) that must be filed online when annual turnover exceeds 300,000 NIS including VAT; this is the actual submission vehicle for the figures.
- Add bilingual headers (Hebrew/English) to all reports.
- Format all amounts in NIS with proper separators and parentheses for negatives.
- Export to PDF and Excel.
Result: Complete set of annual financial statements (P&L, Balance Sheet, Cash Flow) in bilingual format, as a draft for the company's auditor. A company's financial statements must be audited by the company's CPA (roeh cheshbon mevaker) before they accompany the tax return; the output is not audited statements. Do not describe them as a Registrar filing: a private company's annual report to the Registrar of Companies generally does not attach the financial statements (only a company whose articles fail certain conditions must attach the balance sheet).
Example 3: Quarterly Comparison Report for Management
User says: "I need a Q3 vs Q2 profit and loss comparison for my business to present to investors."
Actions:
- Extract Q2 and Q3 financial data from transaction records.
- Generate side-by-side P&L with columns for Q2, Q3, and change (amount and percentage).
- Highlight significant variances (changes exceeding 10%).
- Calculate key ratios: gross margin, operating margin, net margin for both quarters.
- Add trend indicators and summary commentary.
Result: A management-oriented P&L comparison report showing quarter-over-quarter performance, including variance analysis and margin trends, formatted in NIS with bilingual headers.
Gotchas
- Israeli financial reports use NIS (New Israeli Shekel) with the symbol appearing after the number in Hebrew context (1,000 ש"ח) but before in English context. Agents may place the currency symbol incorrectly.
- Bi-monthly VAT summary reports must align with the 6 reporting periods (Jan-Feb, Mar-Apr, etc.), not quarters. Agents may group data by quarters, which does not match Israeli tax authority requirements.
- Hebrew reports must render RTL (labels on the right, amount columns to their left). Agents often emit LTR tables with Hebrew labels, which reads backwards. Do not invent a side-by-side "assets right, liabilities left" layout; use the vertical layout of Step 5 unless the user's accountant asks otherwise.
- The Hebrew financial term "revach golmi" (gross profit) vs. "revach tafuli" (operating profit) vs. "revach naki" (net profit) are distinct concepts. Agents may mistranslate or conflate these terms.
- Israeli small businesses (osek patur and osek murshe) have different reporting requirements. Agents may apply corporate reporting standards to sole proprietors, generating unnecessarily complex reports.
Reference Links
| Source | URL | What to Check |
|---|---|---|
| IFRS Foundation | https://www.ifrs.org | IFRS standards (mandatory for public companies; optional for private companies and SMEs) |
| Institute of Certified Public Accountants in Israel | https://www.icpas.org.il | Israeli accounting profession norms and standards |
| Israel Tax Authority | https://www.gov.il/he/departments/israel_tax_authority | VAT reporting, corporate tax filings |
| Companies Registrar | https://www.gov.il/he/departments/israeli_corporations_authority | Company annual report (dooch shnati) obligations; statements generally not attached for a private company |
| openpyxl documentation | https://openpyxl.readthedocs.io/en/stable/ | Writing styled XLSX reports from Python |
Troubleshooting
Error: "Trial balance does not balance"
Cause: Total debits do not equal total credits, indicating one or more posting errors in the transaction journal. Common causes include single-sided entries, transposed digits, or unposted adjustments.
Solution:
- Review the difference amount; check if any single transaction matches that amount.
- Divide the difference by 2 to check for entries posted to the wrong side.
- Divide the difference by 9; if it divides evenly, look for transposed digits.
- Run a journal entry audit to find entries without matching contra-entries.
- Check for unposted period-end adjustments (depreciation, accruals, provisions).
Error: "VAT rate mismatch"
Cause: The VAT calculation uses an incorrect rate. Israel's standard VAT rate is 18% (in effect since January 2025). There is no reduced VAT rate in Israel: transactions are either standard-rated (18%), zero-rated (0%), or exempt. Exports are zero-rated, fresh unprocessed fruit and vegetables are zero-rated (not exempt and not "reduced"), and certain supplies such as financial services are exempt.
Solution:
- Verify the current VAT rate from the Tax Authority (Rashut HaMisim) website.
- Check if any transactions are zero-rated exports (VAT = 0% but still reportable).
- Check for VAT-exempt items that should not have VAT applied.
- Separate transactions by VAT category: standard (18%), zero-rated (0%), exempt.
- Recalculate the VAT summary with correct rates per category.
Error: "Currency formatting inconsistency"
Cause: Mixed formatting of NIS amounts across report sections, such as using different decimal separators or inconsistent negative number notation.
Solution:
- Standardize all amounts to NIS with comma thousands separator: 1,234,567.89
- Use parentheses for negative values, not minus signs: (45,000.00) not -45,000.00
- Ensure all amounts show exactly two decimal places.
- Verify that the NIS symbol or "NIS" label appears consistently in report headers.