National Labor Court Rules Firm Must Pay Social Security for Employee Cars
The National Labor Court ruled that infrastructure firm A. Litman must pay substantial social security contributions for employee vehicles lacking strict private-use restrictions.
The National Insurance Institute has successfully secured a ruling requiring A. Litman, an electrical and infrastructure engineering firm, to pay hundreds of thousands of shekels in social security contributions for vehicles provided to its employees. Amichai Itam, a judge at the National Labor Court, dismissed mutual appeals concerning a previous ruling by the Tel Aviv Regional Labor Court.
Litman employs approximately 30 workers and is managed and controlled by Ronen Litman. Company-provided vehicles generally constitute a taxable benefit subject to social security, unlike operational vehicles reserved exclusively for business tasks. The National Insurance Institute initially sought 1.1 million shekels from the company, noting the amount could rise to 1.3 million if formal litigation proceeded without compromise.
Legal Standards and Private Use
The Regional Labor Court previously rejected Litman's appeal regarding most of the fleet, establishing that the automobiles were routinely used for personal errands without strict oversight. However, the court partially sustained an appeal concerning a Toyota Corolla registered to Ronen Litman personally, accepting that it actually served corporate operations.
"The decisive test is the potential for vehicle use rather than the question of actual use, and the company failed to maintain strict, unambiguous internal policies prohibiting private driving," Judge Itam stated in his ruling.
Judicial Precedent on Tax Liability
The National Labor Court upheld that the firm's management failed to enforce sufficient restrictions on private travel after hours. Furthermore, the court dismissed Litman's defense argument relying on prior legal counsel, clarifying that professional opinions do not exempt taxpayers from civil or tax liabilities.
President Ilan Itach, Judge Dori Spivak, and public representatives Yaron Levinson and Barry Bar-Zion concurred with the judgment. The National Insurance Institute will now recalculate the final assessment downwards, excluding the vehicle assigned to Ronen Litman.
