At the Institute of CPAs study day on the 2025 annual reports in July 2026, an accountant in the audience asked what happens to the advance tax payments a company made when its income ends up attributed to the shareholder. The national supervisor in the Israel Tax Authority's assessment division answered that there is a fix: guidance issued a few months earlier by the collection and assessment divisions, which lets the shareholder ask for a three-month freeze on his tax debt.
How the gap between company and owner opens
Since January 2025, section 62A of the Income Tax Ordinance attributes a larger share of a closely held company's income to its controlling shareholder, as if he had earned it personally. The October post on the law explains who it covers. Through 2025 most companies kept paying advances based on past turnover, which means they also paid on the part that later lands in the owner's personal return.
When the returns are filed, the picture flips. The company's file shows a credit balance, and the individual's file shows a debt. The debt is due now, and the company's refund arrives whenever it arrives. The supervisor put it plainly: attribution "creates a tax refund in the company and a tax debt for the individual".
The freeze and what it leaves running
The guidance was published on 23 December 2025, signed by the senior deputy director for assessment and audit and the head of collection enforcement. It offers two routes. In the first, the company keeps the income, pays corporate tax on it and pays the shareholder a dividend equal to what should have been attributed to him. The corporate tax already paid is credited against his tax, so no gap opens.
In the second route the company books an expense and the owner reports the income. Here the guidance first asks that both returns be filed on the same date where possible. The shareholder can then apply to the collection department at the assessing office that handles his file, on a form attached to the guidance, for a three-month freeze on the debt. If the company's refund has not arrived by then, he can ask for three more months.
There are conditions. The freeze covers only the part of the income on which advances were paid in the company's file, and only if the rest of the individual's debt is settled. It does not stop linkage and interest on the debt. On the other side, the company's refund also carries linkage and interest. A late-payment fine charged to the shareholder on the attributed part will be cancelled, and so will a fine on a company that cut its advances because of the attribution. At the study day the supervisor said every assessing office had received the guidance, and Execution Instruction 9/2026 from September 2026 repeats the rule.
2026 advances move to the owner
For the following year, the supervisor said the problem should sort itself out. The company will report lower turnover for advances, the individual higher turnover, and the demand for advances will shift to the individual's file.
The guidance asks companies to set their 2026 advances only to cover tax on income that is not expected to be attributed to the owners. A reduction or cancellation is made through query 415 in the Authority's system, with code 20 to reduce, 30 to cancel and 14 to increase, and no fine is charged for a reduction caused by attribution. The relief does not apply to anyone who cut the company's advances without starting to pay advances in the personal file. The income tax advances guide explains how the amount is set.