Israeli Business War Compensation

Israeli Business War Compensation

Legal notice

This is a free information tool operated by an AI model. It explains the rules and calculates from the figures you enter, but it does not examine your full circumstances and does not constitute tax advice. All of its outputs are produced automatically, with no involvement, review, or approval by a tax adviser or accountant, and an AI model may err, omit data, or present a wrong conclusion. The binding computation is the Tax Authority's and responsibility for reporting is yours. This tool is not a substitute for advice that takes account of the particular circumstances and needs of each person, and all use of its output is the user's sole responsibility.

Problem

When war disrupts an Israeli business, the lost revenue, idled employees on חל"ת, and fixed costs that keep ticking can mean thousands of shekels in compensation per month - but the rules are split across two parallel frameworks (Iron Swords 2023 and Shaagat HaAri 2026), four mutually exclusive tracks, and a maze of thresholds that depend on VAT filing cadence, business location, turnover size, and employee headcount. Filing under the wrong track or missing the 25% threshold by a single percentage point forfeits the claim for that period, and the choice is usually irreversible.

Instructions

Step 1: Identify the framework

Two parallel frameworks operate today. Both rely on the same Property Tax & Compensation Fund Law, 1961 (חוק מס רכוש וקרן פיצויים, תשכ"א-1961), §§35-36, but each has its own hora'at sha'a (temporary order) regulations.

The qualifying period is statutory, not portal guidance (§38לו, "תקופת הזכאות"), and has exactly two rows:

"עוסק המדווח על בסיס מזומן" has three cumulative conditions: VAT liability on receipt of consideration (Chapter F of the VAT Law); the bulk of ongoing receipts arriving in the month FOLLOWING the transaction, or the claimant being a מוסד חינוך; and a turnover decline below 40% in the reporting period containing the התקופה הקובעת. Meeting the first two but declining 40% or more leaves the claimant on March-April. The wage qualifying period stays March-April 2026 for everyone, and the התקופה הקובעת is 01.03.2026 to 30.04.2026 throughout.

Filing windows are per-track and OPEN as of mid-2026 - do NOT quote a single "deadline". Verify the live date on the specific track's gov.il page before promising anything; windows have been extended repeatedly.

Individual extensions of up to 18 months are available on request. Do NOT confuse these with the 31.05.2026 / 30.06.2026 dates, which are the annual income-tax-report extension and the state-guaranteed loan deadline, NOT the compensation-claim deadline. A user told "the deadline was 30.06" would wrongly abandon a claim they can still file.

Statutory anchors. The Shaagat HaAri framework was passed in second and third readings on 4.5.2026 and published in ספר החוקים 3525 as two parallel laws: חוק התוכנית לסיוע כלכלי (הוראת שעה) (סיוע לעסקים ולמוסדות ציבור), התשפ"ו-2026 (business-side, governs everything in this skill) and חוק התוכנית לסיוע כלכלי (הוראת שעה) (תעסוקה), התשפ"ו-2026 (employee-side, governs the chal"t dmei avtala flow, that's israeli-unemployment-benefits-navigator). Cite the published act, not the March 2026 draft framework, when communicating with the Tax Authority or in appeals.

Dedicated portal for Shaagat HaAri eligible-expenses claims. Use https://www.gov.il/he/service/claim-compensation-indirect-damage-rions-roar for the March-April 2026 indirect-damage track. It is distinct from the general Iron Swords portal and the special-area portal (both in Step 6); filing under the wrong portal routes to the wrong adjudication track.

Ask the user when their revenue loss occurred and route accordingly. Most live claims in 2026 still fall under Iron Swords for older damage periods.

Step 2: Check the four-gate eligibility test

Reject early if any gate fails - the system rejects with no recourse.

Excluded claimant classes (definition of "ניזוק", 12 limbs). Screen BEFORE running any track: a business in one of these gets nothing even with a qualifying decline. The State; budgeted bodies and health corporations (s.21 Budget Foundations Law); kupot cholim; public institutions that are not a מוסד ציבורי זכאי; statutory corporations; financial institutions (banks and auxiliaries, insurers, exchange members, managing companies, fund managers); dealers in real-estate rights held as trading stock; businesses with over 50% of 2024 or 2025 work on projects running over a year (except a קבלן ביצוע); businesses that reported closure, zero turnover for the preceding four months, or inactivity before 01.03.2026; and anyone whose occupation is agriculture (farmers route to the dedicated agriculture track, not Step 4). Full list in references/domain-checklist.md.

Northern exception: If the business is in an evacuated yishuv on the northern border (Galilee), compare against 2023 instead of 2025, AND the minimum decline gate is waived for the northern dedicated track.

Step 3: Pick the highest-yield track (mutually exclusive)

A business can file under only ONE track per damage period. Run all four, recommend the highest, then apply the §38לז(ג) floor rule (Step 4).

Step 4: Compute the eligible expenses (הוצאות מזכות). The wage part and the fixed-cost part are ADDED, not compared

For the nationwide track only. This is the single most important rule in the skill: the statute defines הוצאות מזכות as the fixed expenses PLUS the eligible wage part, and then doubles the result. It is NOT "run both tracks and take the higher". Paying the higher of the two understates the grant for every business that has both payroll and fixed costs, which is almost all of them.

Statutory definition (§38לו, חוק התוכנית לסיוע כלכלי (הוראת שעה)(סיוע לעסקים ולמוסדות ציבור), התשפ"ו-2026):

"הוצאות מזכות" - ההוצאות הקבועות בתוספת חלק השכר המזכה, והכול עד לסכום כמפורט להלן, לפי העניין, כשהוא מוכפל ב־2

declineRate  = (refTurnover - claimTurnover) / refTurnover     // must EXCEED 0.25 to qualify at all
wageExpenses = LOWER OF the two statutory limbs (see below)    // "הוצאות השכר בתקופה המזכה לעניין שכר"
wagePart     = wageExpenses x declineRate                      // "חלק השכר המזכה"
fixedPart    = see the three הוצאות קבועות variants below      // "הוצאות קבועות"
eligible     = min(wagePart + fixedPart, cap) x 2              // the sum AND the cap are both doubled

Wage expenses are the LOWER OF TWO LIMBS, and limb (a) carries a 0.75 factor. Raw Form-102 gross wages are NOT the wage base: the statute takes 75% of them first, then applies the 1.25 employer-cost factor. Dropping the 0.75 inflates the wage component by 6.67% wherever limb (a) binds.

limb(a) = 0.75 x eligibleEmployeeWages x 1.25       // = 0.9375 x eligibleEmployeeWages
limb(b) = avgWageMarch2026 x eligibleEmployees x 1.25
wageExpenses = min(limb(a), limb(b))

Apply the 0.75 x 1.25 EXACTLY ONCE, inside limb (a). The decline rate multiplies the lower-of result afterwards, never a limb.

Three claimant classes, each with its own limbs (§38לו, definition "הוצאות השכר בתקופה המזכה לעניין שכר"):

The NPO ratio is base-year income excluding supports and donations over base-year income including them, per the s.131 return. An NPO running the general formula errs twice (1.25 rather than 1.325, and no ratio), so route NPOs and kibbutzim to their own row first.

Aggregate cap, by base-year turnover:

The old "aggregate ceiling of 600,000 NIS" was the PRE-doubling figure quoted as if it were the payout ceiling. For a business under 100M turnover the real ceiling is 1.2M.

Fixed expenses (הוצאות קבועות) are NOT the owner's rent + electricity + leasing. The statute derives them from the VAT return, and it defines THREE variants. Pick the claimant's row before computing:

Ask a general claimant for סך כל התשומות השוטפות בשנה הקודמת off the VAT reports; monthly rent and utility bills produce a number unrelated to what the Tax Authority computes. An NPO divides by active months, not by 6, and carries its own x2. A group-registered dealer must reconstruct standalone inputs; the consolidated figure is wrong.

Fixed-cost coefficient (מקדם ההוצאות הקבועות) - the general tiers plus four sector overrides:

The three sector figures multiply the tier rate that would otherwise apply; they do not replace it. The statute reads "השיעור כאמור בסיפה של אותן פסקאות משנה, לפי העניין, מוכפל ב־0.35". A fuel retailer at a 50% decline takes the 11% tier times 0.35.

The statute's bands read "עולה על 25% ואינו עולה על 40%", i.e. (low, high]. Exactly 40% decline falls in the 7% tier, not the 11% tier.

Limb (b) in numbers (the per-employee ceiling):

limb(b) = 13,769 x 1.25 x numberOfEligibleEmployees

13,769 is the National Insurance s.2(b) average wage as known in March 2026 (the statute's own reference point), not 13,773. x1.25 is the employer-cost coefficient (מקדם עלות מעביד). Limb (b) therefore behaves as a per-employee ceiling on limb (a), not a separate additive component.

Two statutory deductions from the wage base: subtract pay for vacation days the employee used (ימי חופשה שניצל העובד), and subtract any sums Bituach Leumi reimbursed the employer for reserve duty (החזר תגמולי מילואים).

Do not double-count חל"ת workers in the wage base. An employee on unpaid leave earns no wages in the period and is collecting dmei avtala from Bituach Leumi (Step 5), so their salary is NOT part of the wage base for those days. Counting them in both inflates the grant and invites a clawback of the 60% advance.

Floor rule (§38לז(ג)): if a business on the nationwide track would receive LESS than the small-business band (b)(7) would have paid it, it is entitled to the (b)(7) amount instead. Compute both and apply the floor.

Step 4b: Small business continuity grant table (turnover up to 300,000 NIS only)

Every amount in the statute is PER MONTH, and the law pays double (פי 2) for the March-April 2026 period. §38לז(ב): "זכאי לפיצויים בסכום של פי 2 מהסכום המפורט בפסקאות שלהלן". The table below is ALREADY doubled - these are the amounts actually paid.

The four bands above 120K scale by the statutory damage coefficient (מקדם הנזק): 1 (decline over 25% to 40%), 1.5 (over 40% to 60%), 2.4 (over 60% to 80%), 3 (over 80%). The three bands up to 120K pay a flat doubled amount regardless of decline tier.

The decline gate DOES apply to this track. §38לז(ב) pays these amounts "ובלבד שמתקיימים לגביו התנאים הקבועים בפסקאות (2) עד (6) שבסעיף קטן (א)", and (a)(2) requires that "שיעור הירידה במחזור העסקאות שלו עולה על 25%". A business at or below 25% decline gets NOTHING on this track either. Never tell a 20%-decline business that the small-business track "does not impose the decline gate".

Notes:

• Online filing window: 17.05.2026 - 17.08.2026; verify on https://www.gov.il/he/service/claim-compensation-indirect-damage-rions-roar before promising deadlines.
• scripts/calc_grant.py computes this table as well as the nationwide track.

Step 5: Stack with reservist & employee-side benefits (additive, not exclusive)

Three additional grants stack ON TOP of the indirect-damage track:

1. Employee חל"ת dmei avtala (Treasury 30.03.2026, finalized by Knesset 4.5.2026): employees on continuous unpaid leave are paid for ALL days from day one once they clear a bifurcated minimum, 5 consecutive days only if the חל"ת started 28.2.2026 or 1.3.2026, 10 consecutive days for any later onset (5.5.2026 amendment). The employee files at btl.gov.il; the employer hands over a signed הסכם חל"ת and files Form 100 with exact start and end dates, and שירות התעסוקה registration is required. Payment timing, waiting-period and vacation-day mechanics live in references/claimant-paths.md and in israeli-unemployment-benefits-navigator.
2. Employer reservist compensation - for each employee called up on צו 8 reserve duty, the employer receives 20% of the employee's average daily wage × reserve duty days served, paid by Bituach Leumi to the employer.
3. Self-employed reservist grant (for owner who served themselves, separate from this skill's main scope) - covered in israeli-miluim-manager.

Step 6: Generate the filing checklist

Output a documentation pack the user must assemble before opening the gov.il filing.

Required documents (all tracks):

• VAT report 1301 (דוח עוסק) for reference period and claim period
• Profit & loss statement for the reference year
• ניהול ספרים (revenue books) for both periods
• Bank statements covering both periods
• Business registration confirmation (תעודת עוסק) showing the business opened before 01.03.2026 and was notified to the Tax Authority by 28.02.2026

Wage track only:

• Form 102 (טופס 102) - payroll declaration for claim-period months
• Employee CSV: ID, name, gross monthly wage in claim period
• For each employee placed on חל"ת: signed הסכם חל"ת with start/end dates

Fixed-cost track only:

• Invoices or contracts for: rent, electricity, leasing, recurring SaaS, communications

Submission:

• Tax Authority online portal for Shaagat HaAri eligible-expenses track (March-April 2026): gov.il/he/service/claim-compensation-indirect-damage-rions-roar
• Tax Authority online portal for Iron Swords general nationwide track: gov.il/he/service/compensation-indirect-damage
• Tax Authority special-area portal (north / specific yishuvim): gov.il/he/service/claim-compensation-indirect-damage
• Advance request, nationwide (businesses across the country EXCEPT קו העימות border settlements): gov.il/he/service/request-for-dvance-dealers-shaagat-haari
• Advance request, border settlements (יישובי ספר / קו העימות): gov.il/he/service/pay-advances-to-business-owners-in-frontier-roaring-lion
• Hotline: *4954 (Tax Authority)
• Email: nezekakif@taxes.gov.il

Step 7: Communicate the cash-flow schedule

Set realistic expectations:

• 21 days after a complete filing: 60% advance payment lands.
• 150 days: if no decision has been issued, an ADDITIONAL 10% advance is paid (70% advanced in total). This is NOT the final determination of the balance (§38מא(ד)).
• 8 months: if no decision is issued, the claim is automatically approved.

Step 8: Plan for the tax bill on the grant

The grant is פיצוי פירותי - revenue-substituting compensation. It is taxable as ordinary business income at the recipient's marginal rate, reported on the annual return for the year of receipt. A business owner who treats it as windfall and doesn't reserve for tax can lose 30-47% of the grant to mas hachnasa surprise.

Surface this proactively. Suggest the owner top up מקדמות (advance tax payments) for the year, or apply for פריסה (income spreading) if the grant is large relative to typical annual income.

Step 9: Appeals if rejected or under-paid

The live Shaagat HaAri track has its own two-stage appeals path, set by the 2026 economic-assistance law, NOT by §38ל.

Both windows are fixed at 60 days by statute. Do not tell a claimant the day-counts "live in the operative hora'at sha'a", and do not send the objection back to the officer who issued the decision. Miss the השגה window and the ערר window slams shut too. Flag this immediately to any user with a denial or partial approval.

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Reference Links

Gotchas

1. Track exclusivity is per damage period, not per business. Choose the wrong track and the entire period's claim is forfeit (no reverting). Always run all four track calculations before recommending.
2. The 25% threshold is a hard cliff, not a sliding scale. A business at 24.9% decline gets nothing under the wage/fixed-cost track. The fixed-cost tier multipliers (7%/11%/15%/22%) only kick in once the gate is cleared. Note: under Shaagat HaAri the 25% test is the SAME for monthly and bi-monthly filers (the bi-monthly filer compares the full March-April period) - do not apply a halved 12.5% bi-monthly threshold, which was a mistaken carryover from earlier framework drafts.
3. The wage part and the fixed-cost part are ADDED, then doubled (§38לו). They are NOT alternatives. Paying "whichever track is higher" understates the grant for any business with both payroll and fixed costs. Within the wage part, wage expenses are the LOWER OF 0.75 x wages x 1.25 and 13,769 x 1.25 x employees, and only then multiplied by the decline rate. The 0.75 is not optional and the second limb is a CEILING, not a second additive component.
4. Northern evacuated businesses use 2023 baseline AND have the decline floor waived - but only on the dedicated northern track. If the agent files under the standard nationwide track, the 2023 baseline does NOT apply and the claim under-pays.
5. The grant is taxable ordinary income. Owners frequently spend the 60% advance and get hit by a marginal-rate tax bill (up to 47% for high earners) on the annual return. Always surface this in the output.
6. The 8-month auto-approval rule is a floor, not a service-level commitment. Real-world processing routinely slips. Encourage the owner to hold receipts and respond to any clarification request within 14 days to keep the timer running.

Troubleshooting

Issue: User's turnover decline is 20% - close to the threshold but below

The gate is statutory: the decline must EXCEED 25% (not merely reach it), and it applies to monthly and bi-monthly filers alike. There is no fallback track for a business under the gate. The small-business (up to 300K) track does NOT waive it: §38לז(ב) grants those amounts only "ובלבד שמתקיימים... התנאים בפסקאות (2) עד (6) שבסעיף קטן (א)", and (a)(2) is the decline test. Telling a 20%-decline business to file the small-business track sends them into a claim that cannot succeed. The one genuine avenue: if the claimant is a cash-basis filer (עוסק המדווח על בסיס מזומן) or a קבלן ביצוע, its statutory qualifying period is May and June 2026, not March-April, so a business that looks flat in March-April may still show a qualifying decline over May-June. Check the three cumulative conditions of the cash-basis definition first, in particular that the decline in the reporting period containing March-April was below 40%. If the claim is for an older Iron Swords damage period, check that regulation's own threshold.

Issue: Employee was on חל"ת for 8 days

The Shaagat HaAri minimum is bifurcated (effective 5.5.2026 amendment): 5 consecutive days if the chal"t started on 28.2.2026 or 1.3.2026 (the first two war days only); 10 consecutive days for chal"t starting any later date. Once the applicable threshold is crossed, dmei avtala covers ALL days from day one (no waiting period). Eight days fails BOTH gates if the chal"t started after 1.3.2026 (needs 10) and would also fail the 5-day gate if not in the early-onset window. Recommend the employer extend the leave to 10 consecutive days for the general case, or fall back to standard dmei avtala rules (30-day default with five-day waiting period) if eligible. Splitting the leave (e.g., 5 days off, 2 days back, 5 days off) does NOT aggregate; each block is evaluated separately and must independently clear its applicable threshold. The 5-day early-onset cohort's first BL payments only landed June 2026 due to the late amendment, so flag the payment-timing delay to those users.

Issue: Business opened 15.01.2025 - newer than the standard pre-01.01.2025 cohort

Eligible, but the baseline formula changes. For a business opened after 01.01.2025 the base turnover is: total transactions from the opening date (or 01.07.2025, whichever is LATER), divided by the number of active months, x2 for the two-month eligible period (and x12 for the base year). Apply the decline test against that alternate baseline. The one genuine cliff is different: the business must have OPENED before 01.03.2026 and notified the Tax Authority of the opening by 28.02.2026, or it cannot claim at all. A business opened on 28.02.2026 still clears that cliff.

Issue: User received private business interruption insurance payout

Government compensation is reduced 1:1 by amounts received from private war/BI policies (anti-double-recovery rule, §36 of the Property Tax Law). User must disclose private claims in the gov.il filing. Verify the user's specific policy language with their insurance broker; war-risk coverage varies significantly between Israeli BI products.

Issue: Caller represents a nonprofit (עמותה / מלכ"ר), not a for-profit business

Per the Treasury brief (30.03.2026), an עמותה qualifies for the same compensation framework if at least 25% of its turnover is "income from activity" (הכנסה מפעילות). Use the standard Step 2 eligibility gates and Step 3 track routing. NPOs that fail the 25%-from-activity threshold but were nonetheless harmed by war restrictions get a separate dedicated grant program coordinated by Treasury and the Ministry of Culture & Sport (tens of millions ₪ allocated, details published separately); refer the caller to the live gov.il announcement rather than the standard indirect-damage flow.

Issue: Caller operates a daycare (מעון יום / גן ילדים פרטי / משפחתון / מעון סמל)

Three paths exist: the turnover-drop track (parent refunds count as a turnover decline and feed Step 4), the small-operator path (turnover up to 300,000 NIS, Step 4b table), and חל"ת for staff. Paths 1 and 3 combine; the small-operator table is exclusive. Full detail, including what the State can and cannot require of the operator, is in references/claimant-paths.md.

Issue: Caller is in an evacuated northern border yishuv (קו העימות צפון)

Three mutually exclusive 100% tracks: מסלול מחזורים, מסלול אדום, and מסלול חקלאות. Walk through the applicable ones and pick the higher-yielding option. Salaried employees in these yishuvim get 100% of wage, not 75%. A border business does NOT use the nationwide advance portal; it has its own frontier portal. Per-track amounts, caps and the later filing windows are in references/red-track-yishuvim.md.

Bundled Resources

• references/domain-checklist.md - coverage map for fact-check / future updates
• references/calculator-walkthrough.md - worked examples across all four tracks
• references/red-track-yishuvim.md - list of border-area yishuvim eligible for §35 red track
• scripts/calc_grant.py - reference implementation of the wage/fixed-cost track calculation