VAT offenses aim to generate illegal profits and involve a disorderly relationship with the tax authority. The worst case is the evasion of VAT proven to be intentional. VAT offences are divided into two types: the first type is a technical offense related to a forbidden method of conduct with no criminal intent to eliminate VAT, while the punishment is up to one year in prison. The second type is a substantive offense, such as intentional tax evasion, the punishment for which is up to 5 years in prison. It should be noted that VAT offenses are usually not committed by professional criminals or citizens with criminal records, but by ordinary citizens, who find themselves I a complicated situation involving the tax and law authorities.
Value Added Tax (VAT) is an indirect tax imposed on the consumer through the business operations’ turnover, regardless of profit or loss of the business owner. The tax is imposed on the added value throughout the entire production and marketing process. Manufacturer, wholesaler and even a retailer must pay the VAT, which is 17% of the service or product price at the time of purchase.
Submitting a periodic VAT report
Some tax provisions unequivocally require a discipline and systemic conduct. A periodic VAT report should be submitted every month or two months, at the latest. Violation of these provisions under Section 117 (A) (6) of the VAT Law, is a the most common tax offense. Self-employed people, who encounter financial difficulties, must come up with a temporary solution to not submitting periodic reports and therefore, using the money owed to VAT for personal and business needs.
The other reason of failure to submit VAT reports is an opening of a credit line by not reporting and using funds owed to VAT for business operations. Courts generally don’t distinguish between the two cases. When payment is delayed due to financial difficulties of the business, or the delay is intended to postpone the transfer of funds to VAT, there is still a concern that under certain circumstances, the tax authorities will not be able to receive the funds even in case of insolvency. An attorney specializing in economic crimes will be able to help you throughout the investigation and trial.
You must undergo VAT investigation? What should you do?
VAT investigators are authorized to confiscate the “goods” under Section 109 (A) (2) of the VAT Law. The authority is granted to the VAT investigators by virtue of a statutory provision and they must apply to the court to exercise their authority. VAT investigations are held at the Tax Authority offices after obtaining intelligence information or a routine check of the accounting books. When you are called to undergo a tax investigation, you should know how to behave in order to not make things more complicated.
It is important to know that once you became a VAT offense suspect, you should contact an attorney, who specializes in economic crimes, such as tax offenses. Ronen Oren & Co. Law Office are considered a leading firm in this field in Israel. Firm’s taxation experts will conduct a thorough examination of the offense, provide an efficient service and support from investigation until trial completion, and prepare the client for the investigation. The firm maintains the rights and interests of our clients, while working uncompromisingly towards a successful result.