cpa in israel

Capital market accountant – trader? It’s time to pay less income tax

We will talk about the essential questions, the question often arises since when is a person considered a trader in securities? 

How does taxation work in the capital market? What is the difference between an investor in securities and a daily stock market trader in securities? How do you get a tax refund in the capital market? and the like.
What is a capital market accountant?
A capital market accountant is, as you can see, very experienced and sensitive and familiar with the market to distinguish between a trader in the capital market or not.

There is no formula here according to which you get the answer, but experience and knowledge of a variety of variables is required
We tried to give some of the 30 years of experience we have gained in handling Nostro dealers.

By the way, you’ll be surprised, but it’s not always bad to be considered a securities trader. There are times when you should be considered a securities trader. Many times we will also advise a person to start a company.

Who is suitable to work with a capital market accountant?
Dealing with ho market traders or nostro companies operating in the capital market requires a thorough knowledge of the capital market, the taxation applicable to them and the complex tax plans that allow those companies to benefit from reduced tax rates or tax exemptions.

Individuals trading in the capital market perform the activity independently.

In most cases, you should ask to be considered a securities trader for tax purposes. In this way, it will be possible to offset losses from this activity from other income that the individual has, such as income from salary, self-employed business, pension, etc. In addition, this makes it possible to offset financing expenses, rental expenses and municipal taxes, communication expenses and depreciation.

Why is it worth working with Ben Shmuel accountants?
the experience! For more than 30 years we have been handling capital market operators, including Nostro companies, hedge funds, independent traders, individuals operating in the capital market and mutual funds.
As a general rule, every resident of Israel who has turned 18 years old in the tax year is required to submit a statement to the income tax, but there are special provisions that exempt them from submitting a statement.

On the differences between a trader in securities and an investor

If so, the question arises since when is a person considered a nostro trader / trader in the capital market? There is a collection of tests that determine whether a person is a trader or not.

The number of operations – if a person performs hundreds of operations a year, the scale will tilt more in the direction of a trader in the capital market.

The holding period of the security – if a person holds the security for a few days, then it is more likely that he is a trader.

Financing – activity in securities while relying on own capital and not foreign capital will characterize those who are not considered traders.

The person’s occupation – if a person works all day as an employee and at night works for an hour or two in securities, then this will be considered less as if he is trading in securities.

Investment volumes – those who invest considerable sums of money in securities activity are more likely to be seen as a securities trader.

Studies and experience – it is understood that those who take many and long courses or those who worked for example before as a broker in an investment house are more likely to be seen as a securities trader compared to those who did not study.

What courses did he take? – Those who took courses of 5-6 hours are not considered as those who took two-year courses.

The period of activity – those who, for a long period of time, earn large sums of money each year from activity in securities. More will see him as a trader compared to someone who has made money in securities for the first year.

Employees – it is understood that whoever employs an employee or employees will be considered a merchant.

Utilities – did you use utilities? Usually the odds will be more in your direction as a trader.

What are special circumstances?

Above all these tests there is the “special circumstances” test which is a test that collects all these tests and examines whether something special happened that affects the decision whether a person is a trader in the capital market or not. For example, if a person bought speculative shares on day 1 and on credit, on day 2 his wife informed him that she was divorcing him and on day 3 he sold the shares at a large profit. In such a case, even though the individual tests work against him, the roof test tips the scales in the direction of a non-trader.

Common mistakes

Did you know that on average 20% of the 867 approvals produced by the banks are wrong? What are the tests for the tax authorities according to which a person is considered a trader in securities? We handle a wide variety of traders in the capital market, such as Nostro companies, Nostro traders, hedge funds, individuals who manage a portfolio of securities with high trading volumes and more. Read more about the capital market accountant

In Israel and around the world, there are mainly two types of traders in the capital market – Nostro companies and individuals. Nostro companies are those companies that specialize in trading in the capital market and that trade in their equity to generate profits in securities trading.

Is accountant experience in the capital market important?

One of the most common questions asked by traders in the capital market is, am I obligated to submit an annual report to the income tax? Well, section 131 of the Income Tax Ordinance which discusses the subject sheds light on this question in a way that is not ambiguous.

The special provision that is relevant to traders is the provision regarding income from the sale of a security traded on the stock exchange – including income from the sale of a foreign security – for which it is established:

– tax free.

– Either the full tax is deducted from it according to the order or a tax advance was paid for it.

– If the amount of income (sales turnover) does not exceed NIS 2.5 million.

From this instruction we learn several things:

In the taxation of securities, on the face of it, there is no difference between foreign securities and securities on the Israeli stock exchange.

When selling the security, the broker/bank deducts withholding tax or an advance payment is made, the resident is exempt from submitting the report (up to a sales turnover of NIS 2.5 million).

When in the sale of the security no withholding tax is made by the broker/bank, the exemption from submitting the report is not valid and the resident must submit an annual report.

When the turnover exceeds NIS 2.5 million, there is an obligation to submit the report whether or not a withholding tax was made.

After understanding the applicability of the exemption relating to the activity of trading in securities, it is important that we dwell on the concept of “sales turnover”.

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