Israel Mandates Digital Capital Filings for All Taxpayers in 2027

The Israel Tax Authority is ending the era of paper capital declarations. Starting January 1, 2027, every individual required to file a capital declaration must submit it through a new digital portal. The agency launched this platform in late 2026, allowing users to choose between paper and online submission for now, but that option will disappear next year.

A capital declaration is a specific Israeli tax document that lists an individual’s total assets and liabilities. The difference between these figures calculates the person's capital. This process is not a direct tax on wealth. Instead, the agency uses it to spot unreported income. Officials typically request these filings from business owners, holders of at least 10% of a company’s shares, and trust beneficiaries every five to six years.

The shift to digital filing changes how taxpayers prove their numbers. Under the previous paper system, filers could attach a general bundle of documents. The new system requires them to upload purchase invoices or receipts individually for each asset or liability. Tax officials can then verify each item separately. This granular requirement makes the filing process longer and more detailed for taxpayers.

Practical difficulties have already appeared in the current testing phase. Many users struggle to find specific invoices for items like home improvements, furniture, or jewelry. If a taxpayer submits informal notes instead of official receipts, the system may pause the filing. Tax agents are likely to request further clarification in those cases. The agency generally expects a purchase invoice for any single item costing 3,000 shekels or more.

Filers must report assets at their original cost, not their current market value. For example, a home bought for 2 million shekels that is now worth 5 million shekels must be listed at the 2 million shekel cost, plus the value of any improvements. Investment portfolios follow the same rule, listing acquisition costs rather than current market prices on the declaration date.

The new rules also affect new immigrants. Those who established residence in Israel before 2026 remain exempt from disclosing foreign assets. They only report Israeli assets if requested. However, immigrants who take up residence on or after January 1, 2026, must provide full disclosure of their foreign assets as part of the capital declaration.

Taxpayers who receive a demand for a declaration have 120 days to file. Extensions can be granted, but delays in postal service can complicate the timeline. Professionals advise filers to note the date of receipt if a request arrives late. Advisers recommend consulting experienced professionals early to ensure compliance with the new digital standards and documentation requirements.

The agency focuses on the fluctuation in capital between successive declarations. If a business owner’s capital increases, the authority verifies whether reported income accounts for that growth. Officials consider living expenses and taxes paid during this review. This scrutiny ensures that income generated by assets is properly declared to the tax authorities.