Tax Professionals Investigated for Aiding Shareholder in Evasion
Israel Tax Authority investigators are probing an accountant and a tax consultant for allegedly helping a public company's controlling shareholder evade taxes by misreporting 16.5 million shekels in dividends and concealing corporate withdrawals.
The Central Assessing Officer for Investigations at the Israel Tax Authority is conducting a criminal probe into two tax representatives—a certified public accountant and a tax consultant—representing a controlling shareholder of a public company on suspicion of systemic tax evasion and severe negligence. The investigation centers on allegations that the professionals failed to report owner withdrawals and dividend distributions over multiple tax years.
The case originated during a routine audit conducted by the Rehovot Assessing Officer, which uncovered substantial evidence regarding unreported financial transactions. Following these findings, the case was transferred to the Central Investigations Unit, which established that the suspects assisted their client in filing annual tax returns between 2021 and 2023 while omitting required income disclosures.
Under the Income Tax Ordinance, substantial shareholders are subject to a 30% tax rate on dividend income received from companies in which they hold significant equity. Investigators revealed that the suspects helped the client report approximately 16.5 million shekels in dividends under a designated field intended for regular shareholders. This classification resulted in a preferential tax rate of 25% instead of the mandated 30%, depriving the state treasury of over 800,000 shekels in unpaid taxes.
Furthermore, Israeli tax law stipulates that corporate funds withdrawn by a shareholder must be reported and taxed as dividend income if not repaid by the end of the subsequent tax year. The investigation indicates that during 2021 and 2022, the primary client withdrew substantial funds from a private company under his control without returning them within the statutory timeframe. The suspects allegedly aided the client in omitting approximately 14.6 million shekels in dividend-equivalent withdrawals from personal tax filings.
The investigation transitioned from covert to overt as law enforcement authorities executed search warrants and seized evidence. The suspects appeared before the Rishon LeZion Magistrate's Court, which released them under restrictive conditions while issuing a gag order protecting their identities.
*** Presumption of Innocence: All suspects maintain the presumption of innocence, and no convictions have been handed down.
