2. What is an “Authorized Dealer” and Who May Register as an Authorized Dealer?
An authorized dealer, in contrast to an exempt dealer, is a dealer who must pay VAT at the rate of the turnover of his transactions. On the other hand, the authorized dealer is entitled to a VAT refund in respect of his inputs – that is, the authorized dealer receives from the Tax Authority the VAT he paid for the products or services he acquired for the purpose of his business activity.
Pay attention! At the beginning of the 2000’s, the definition of a “small dealer” and a “small dealer exempt” was abolished, and today the relevant definitions are defined as a authorized dealer and an exempt dealer.
If so, who can register as an authorized dealer?
As opposed to an exempt dealer, for whom there are certain limitations in registration (see separately), each dealer may register as an authorized dealer.
3. Who Should Register as an “Authorized Dealer”?
First, it should be noted that there are certain dealers who are required to register as an authorized dealer, and for them there is no question (for example: a person whose turnover exceeds NIS 100,000 per year, who deals in certain fields or a company).
When there is a choice between activity as an authorized dealership and an exempt business, it is preferable for the dealer to register as an authorized dealer in cases where his customers are with other authorized dealers (as opposed to exempt dealers or private customers) and when the dealer has many inputs (such as significant investment in equipment and furniture).
Our office is well prepared to assist you in examining the considerations for examining VAT registration, while providing a comprehensive explanation of each of the various considerations and applying the above to your specific and unique case.
4. Additional Emphasis on Activity as an Authorized Dealer
- An authorized dealer is required to submit a one-month or bi-monthly report to the VAT authorities, depending on the level of activity.
- As stated, an authorized dealer is entitled to a refund of VAT in respect of his inputs, and is also obligated to pay VAT in respect of his transactions.
- The definitions of “Authorized Dealer” and “Exempt Dealer” are relevant only for VAT purposes, and have no direct bearing on the conduct of income tax and National Insurance.
5. Bookkeeping Obligations and Current Reports to the Tax Authorities of the Authorized Dealer
The books that an authorized dealer must manage:
- The books that an authorized dealer is required to manage depend on the cycle of his activity and the sector of his activity in accordance with bookkeeping instructions.
- Our office is prepared to guide you on which books to manage, and what actions you must follow to comply with bookkeeping instructions.
- As an aside, we note that unlike an exempt dealer, an authorized dealer is entitled to produce tax invoices.
Reports and current payments to the authorities:
- VAT is paid on a monthly or bi-monthly basis.
- Payment of monthly or bi-monthly advances to the Income Tax Authorities (in accordance with the Income Tax Regulations)
- Payment of a monthly deposit to the National Insurance Institute.
Annual and multi-year reports and payments to the authorities:
- Submission of an annual report to the Income Tax Authority.
- Submission of a capital declaration in accordance with an income tax requirement (once every few years).
6. Opening Files in the Authorities to a Licensed Dealer
Opening an authorized VAT dealer file
- The documents that must be brought to our office for the purpose of opening an authorized dealer’s VAT file are:
- ID photo of the business owner
- Photocopy of lease (if applicable)
- Cancel check of your bank account (optional)
- Certificate of vocational training (if available)
Within a short period of time after registration, you will receive a valid dealer’s certificate, with your VAT number as the ID number.
Opening an income tax file:
After opening the VAT file, an income tax file must also be opened, with an assessment officer close to the business.
In order to open an income tax file, a file must be filled in our office with the Income Tax Authority and attached with a photocopy of an identity card.
A few days later, the tax authority sends a letter confirming the opening of the file and specifying the accounting method in which you are charged and the business branch to which you are associated.
After opening the file, you must contact the income tax authority with a request for approval of a full exemption from withholding tax and a bookkeeping permit.
Our office handles, of course, the opening of the file with the income tax authority and all the procedures involved.
Opening a file in the National Insurance Institute:
With the start of business activity, a file should be opened as an independent in the National Insurance Institute, and this duty should not be ignored.
For the purpose of opening a file at the National Insurance Institute, a special form must be filled out and delivered at the offices of the National Insurance Institute closest to the place of residence of the assesse.
After a few weeks, you are expected to receive a booklet of advances from the National Insurance Institute which can be paid by standing order, on the website of the National Insurance Institute or every month through a voucher at the bank. This is when the amount determined for payment derives from the taxpayer’s declaration in the form submitted with regard to his expected income.
These payments constitute only an advance, as the final calculation for the tax year will be made after submission of the annual report to the Income Tax Authority.
In the event that the income tax and VAT files are opened by our office, we will send the file opening forms in VAT and income tax directly to the tax authority offices.