Small- and medium-sized businesses will be able to save a lot of money and trouble by being allowed to pay VAT only when they actually collect the money - if a bill recently approved for its first reading by the Knesset Finance Committee passes.
The proposed law, sponsored by MKs Alex Miller (Yisrael Beiteinu ) and Ruhama Avraham Balila (Kadima ) would apply to professionals, such as lawyers and accountants and other service providers who do not keep inventory and use cash-based accounting, if they make less than NIS 15 million a year. The new bill would allow them to only pay the sales tax they owe to the state once their own customers pay up.
Many service providers, who only have to write a tax invoice and receipt upon payment, are forced by many large companies and institutions to issue the tax documents long before they are paid, sometimes up to 90 days earlier.
Once they write the tax invoice, they have to pay the VAT to the taxman the next month - even if they won't see the cash for a long time. The law would allow small businesses to pay taxes only on the money they have received, once they have been paid.
A tax authority official told the committee there would be a one-time cost of NIS 150 million to NIS 200 million to implement the law.
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