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Government and institution measures in response to COVID-19.

Government and institution measures in response to COVID-19.

General Information

  • On 27.01.2020, The Minister of Health Signed the People's Health Decree to Expand the Ministry's Powers Over the Coronavirus to expand the Ministry's powers to deal with the Coronavirus. Starting from 2.2.2020 the government started gradually closure of sea and land crossings, air transfers (deny entry to anyone who is not an Israeli resident), isolation requirements, till general lockdown on 7.4.2020. Starting from 19.4.2020 the Government discussing “exit strategy” measures, including approval for amendment to Emergency Regulations (Limits on the Number of Workers in the Workplace for Reducing the Spread of the Coronavirus) and reopening of several businesses and services.
  • In parallel the Government and the BoI took significant measures for economic stimulus to the real economy and liquidity support. Financial regulatory authorities were also dealing with the impact of the virus on several sector's in order to support of the financial system and the economy. Additional measures in telecommunication area, cyber and privacy issues.
  • Israel has announced a raft of measures across all areas, including extending tax deadlines, freezing enforcement actions, creating a special loan facility for SMEs and increasing flexibility in the employment market, amongst other measures. The Israeli government on 27 March 2020 published Temporary Regulations #8432 to provide tax-relief measures related to the coronavirus (COVID-19) pandemic.

Tax measures – Direct and Indirect

(e.g. payment deferrals, rate reductions…)

Click here to see a comprehensive summary of jurisdictional tax measures and government reliefs in response to COVID-19.

Employment-related measures

(e.g. state compensation schemes, training…)

  • On 16 March, the government announced further measures of importance to SMEs, which include (alongside measures to enhance access to loans already announced):
    • Special aid grant for self-employed - intended for self-employed with small businesses in anticipation of projected losses due to the decline in economic activity. 
    • Increased flexibility in the employment market by extending unemployment benefits to employees who are sent on unpaid leave for 30 days or more. 
  • On 25 March, the government announced further measures:
    • Manufacturers, Importers, Retailers, Recycling Corporations. 
    • Emergency Regulations - Business Licensing
  • On 24 April, the government approved emergency regulations that provide additional relief in order to gradually restore the Israeli economy to cautious routine in the shadow of the COVID-19 outbreak
  • On 9 May, Prime Minister Benjamin Netanyahu instructed the Ministry of Finance to extend and expand the measures to ease restrictions on receiving unemployment benefits. The decision was approved by Cabinet on 10 May. The eased restrictions include: 
    • Shortening the required period for receiving unemployment benefits to six months for whoever began their unemployment period by the end of April. 
    • extending the eligibility period for unemployment benefits until the end of May for all those whose eligibility ended before then. 
    • National Insurance will be able to pay advances for April unemployment benefits of up to NIS 8,000 even for those people whose applications are still being evaluated. It is anticipated that the decision will also assist discharged soldiers and young people under 25 vis-à-vis extending and expanding eligibility for unemployment benefits.

Economic stimulus measures

(e.g. loans, moratorium on debt repayments…)

  • On 8 March, the Finance Ministry opened a special loan facility for struggling companies to receive support from the State Guarantee Fund for Small Businesses. The facility is primarily aimed at SMEs. It provides working capital loans of up to 5 years to a maximum of NIS 500 000 or up to 8% of the company’s last annual turnover, with options to defer payment for half a year. Banks are expected to provide credit approval within nine working days. 
  • On 11 March, the Government announced a further NIS 10 billion support package, doubling the amount available under the loan fund. 
  • On 16 March, the government announced further measures of importance to SMEs, which include (alongside measures to enhance access to loans already announced):
    • Advance of payments to small and medium government suppliers; 
    • Postponement of self-employed, small and medium business mandatory payments; 
  • Furthermore, a number of other policy measures are currently in place: 
    • Reducing the level of collateral for businesses (while increasing government guarantees at the same time) in the Small and Medium Business Fund from 25% to only 10% for any business that submits a signed statement regarding damages from the Coronavirus. The fund's credit line will be increased to four billion NIS. 
    • A support package of 10 billion NIS to SMEs, mostly through the State guarantee Fund to SMEs, to finance working capital in view of cash flow difficulties: 
      • State guarantees increased to 85% of the loan amount 
      • Reduced collateral up to 10% 
      • Longer repayment period up to 5 years 
      • Shortened loan approval at the bank – up to 9 working days 
      • Loan up to 500 000 NIS or 8% of the company’s annual revenue (the highest between the two)
    • Israel’s five largest banks, which account for about 99% of overall banking activity, declared a deferment of mortgage and loan payments (with a waiver of deferred payment fees) for the next three months. Israel’s largest mortgage bank, bank Mizrahi Tefahot, will postpone payments for four months. 
    • The same applies for state-funded mortgages. 
    • As directed by the Accountant General of the Ministry of Finance, the government pays its suppliers within a few days, while the maximum amount of time to refund businesses was reduced from 45 to 30 days. 
    • Promoting local procurement: encouraging residents to buy from local SMEs by local authorities, through investments in marketing within the community. 
    • On 15 March ,the Accountant General of the Treasury, together with the Ministry of Construction and Housing, ordered relief on mortgage loan payments for eligible borrowers for up to 4 months, to help those affected by the coronavirus crisis. As part of the relief, each borrower can apply for postponement of mortgage payments without needing to go to bank branches, a response will be received within one week of applying and new collection proceedings of any kind against arrears will be frozen.
    • On 3 May, the Ministry of Finance announced a State Loan Guarantee Fund for Large Businesses. The fund will provide loans through banks and institutional bodies that choose to join the fund, for businesses with a turnover of NIS 200 million or more in branches affected by the Corona crisis. The loan will amount to 8% of the annual revenue turnover and up to NIS 100 million. The fund is expected to provide a solution to hundreds of companies in the economy. The new NIS 6 billion State Guarantee Loan Fund is intended for businesses with a turnover of NIS 200 million or more, employing at least 100 employees in Israel and at least 50% of the Company's productive or intellectual property is registered in Israel, in sectors that have difficulties in liquidity as a result of the Corona crisis and offers 8-high loans. % Of business turnover up to NIS 100 million. The state guarantee will be 75% with a business owner's deposit of only 5%. The loan will be given for a period of up to 5 years. Much like the State Guarantee Loan Fund for medium-sized small businesses, here's a 12-month grace period on the loan.
    • On 4 May, the Finance Committee approved the Ministry of Finance's request to increase the State guarantee loan for additional small and medium-sized businesses by NIS 6 billion, which puts the total amount of the fund at NIS 14 billion. In view of the large number of applications and the high approval rate, the Accountant General is preparing for the full utilization of the fund, which is expected to be implemented shortly. Since the beginning of the fund's operations, approximately 50,000 applications have been submitted for a total of about NIS 32.8 billion, the processing of about 23,200 applications has been completed, of which 15,700 loans have been approved, which puts the loan's approval at about 68%. The total utilization of the fund so far is NIS 5.9 billion.

Ministry of Environmental Protection Gives Manufacturers, Importers, Retailers, Recycling Corporations More Time to Submit Reports and Deposit Funds

  • As a result of the spread of the coronavirus and the resulting economic and business consequences, the Ministry of Environmental Protection has examined the requirements detailed in environmental legislation on extended producer responsibility. EPR imposes responsibility for a product's entire life cycle upon the manufacturer and importer of that product, including treating the product after the consumer no longer wants it. Israel has five laws in its EPR system: the Deposit Law on Beverage Containers, the Tire Disposal and Recycling Law, the Packaging Law, the Electrical and Electronic Equipment and Batteries (or e-waste) Law, and the Plastic Bag Law.
  • The support include:
    • Deferral or cancellation of first-quarter reports;
    • Two-month deferral of annual reports submissions for packaging waste and electric/electronic waste;
    • Deferral of financial deposits from importers and manufacturers that are made through recycling corporations to designated funds, deferral of required awareness campaign activities, deferral of waste surveys, and deferral of submission of work agendas.

Emergency Regulations - Business Licensing

  • The regulations provide a 2 month postponement of the bureaucratic processes for business owners. Additionally, any existing permits, licenses and permits granted by authorities to business owners will automatically be extended for another 2 months. All fines will also be postponed. The decision was submitted by the Ministry of Justice and the Interior.
  • Among the approved regulations:
    • Licenses to operate a business in all local authorities will be automatically extended, in order to assist businesses working with reduced staff and businesses that have been forced to close temporarily.
    • Licenses required for running a business from government will be automatically extended. For example, Fire and Emergency, Ministry of Health, Environmental Protection and more.
    • There is no need to renew permits for continued operations. Permits will be automatically extended for another 2 months.
    • All import permits will be renewed automatically to allow the import of goods into the economy and prevent shortages and delays.
  • The Government of the State of Israel has approved emergency regulations that provide additional relief in order to gradually restore the Israeli economy to cautious routine in the shadow of the COVID-19 novel coronavirus. The regulations will take effect at midnight between Saturday, April 25, 2020 and Sunday, April 26, 2020. The new regulations will be valid until Sunday, May 03, 2020, after which further regulations will be assessed in accordance with the continued decline of infection rates.
    • The regulations allow the sale of food from restaurants in a “take-away” style, with no sit-downs, as well as the opening of hairdressers, beauty salons, and other cosmetic services such as laser hair removal and the opening of stores in the public space with the exception of malls. It was also agreed that caregivers who work individually or with patients living in the same household, without contact, while maintaining 2 meters distance, wearing masks, and disinfecting between patients. These activities will be subject to the conditions set out in the public health regulations.
    • The Government approved the expanded aid program for self-employed peoples and small businesses totaling ILS 8 billion, including:
    • Grant for Participation in Fixed Expenses for Small Businesses in the Amount of ILS 5.2 Billion - A dedicated grant for small businesses (up to ILS 20 million annual sales) whose turnover was significantly affected between March and April as a result of the economic impact of the spread of the COVID-19 novel coronavirus will be given assistance to cover fixed expenses. The grant will be given also to non-profit organizations which are designated as eligible public institutions. The grant will be given by the Tax Authority beginning in May.
    • Grant for Self-Employed People in the Amount of ILS 2.8 Billion - Following the grant given in April, a further grant will be given to self-employed peoples whose sales turnover will drop by at least 25% between March and June. Eligibility has also been extended to salaried and self-employed people with a taxable income of up to ILS 1 million per year. The grant will amount to 70% of the average monthly taxable income and up to 10,500 ILS. Grant applications may be submitted through the Tax Authority starting the first week of May. When the self-employed or controlling employee whose average income from a business or monthly salary exceeds NIS 40,000, the amount of the grant will be gradually reduced. Self-employed persons who started operations in 2019 were adjusted in the regulations so that they will be examined in accordance with the 2019 data and reports instead of 2018. In addition, in accordance with the regulations, self-employed persons whose annual turnover exceeds NIS 18,000 and does not exceed NIS 300,000 will receive an additional grant, a third beat in the amount of NIS 700 to NIS 3,025, depending on the amount of their monthly turnover, in addition to the allowance payable to businesses for participation in fixed expenses.
    • Aid Program to Support the Economy During the COVID-19 Novel Coronavirus Crisis - As stipulated by Basic Law, the Minister of Finance this evening presented the Government with a plan detailing the financial aid expenditure for 2020. The expenditure during the coronavirus crisis in 2020 is expected to exceed ILS 50 billion. The total plan amounts to ILS 80 billion. The Economic Assistance Program includes 4 strata: Immediate Response for the Health and Civil Sectors, Social Security Network, Business Continuity Assistance and Acceleration. The approved section includes components for all four strata. As of
    • The plan includes ILS 10 billion for the Ministry of Health, approximately ILS 3.8 billion for self-employed persons, ILS 2.3 billion for a Passover grant, ILS 2.5 billion to credit solutions, ILS 2.6 million for business property tax discounts, and ILS 0.2 billion for improving the service for citizens through digitization.
    • As of 8 May, the Treasury's government assistance program for dealing with the Corona will be expanded from NIS 80 billion to NIS 100 billion. On Friday evening, the Ministry of Finance circulated a legislative memorandum to expand the program with NIS 15.6 billion.
    • Approval of proposal to continue providing a special grant for those aged 67 and over who lost their jobs due to the coronavirus crisis - Accordingly, the government adopted an additional grant for the month of May of up to ILS 4,000 for those dismissed from their jobs in previous months

Financial Services and banking regulators

(rules, directives, etc)

In order to combat with COVID-19, BoI acts in the following areas:

  • Operation in the new reality, including remote activity and business continuity;
  • Measures to support liquidity in financial markets and economic stimulus;
  • Risk management;
  • Consumer protection and other support for households, businesses and corporations;
  • Additional regulatory relief.

Some directives and temporary relief guidance mentioned in this slide.

In order to combat with COVID-19, BoI acts in the liquidity provider

  • 7.5.2020 - From the beginning of the crisis until the end of April, the banks extended the payment of loans to 450,000 customers in all segments of activity, totalling NIS 5.2 billion, unprecedented. In order to continue helping the bank's clients to cope with the crisis, while managing sound and responsible risks, and to create certainty for the general public about payment options, a uniform outline for loan repayments has been formulated, which has been adopted by all banks as of 7 May. The type of assistance required for those affected by the crisis is divided into two types: households and businesses whose crisis evening met their loan repayments and that the damage to their income is expected to be short-term can succeed through the crisis through credit assistance or repayment of loan payments. As long as the impact on income is long-term, or the business is at high risk and there is doubt about its ability to meet the loan repayment for a long time, there is no room for increased credit, and the aid can only be provided in the form of state aid or credit provided with a high government guarantee. This is especially true of high-risk industries. The outline refers to the repayment of loan payments in three sectors of activity (mortgages, consumer credit and business credit), and allows households and small business owners to defer loan payments as follows:
    • Mortgage - repayment will be made for a period of 6 months, with no limit on the amount of the loan balance.
    • Consumer loans - The repayment will be made for a period of 3 months for loans with a balance of up to NIS 100,000. In addition, there is an option (at the discretion of the bank) for a further 3-month deferral of these loans.
    • Small Business Loans - Repayment will be made without limitation on the amount of the loan balance, for a period of up to 6 months, in accordance with the Bank's discretion.
    • Fees - No fees will be charged for deferred loan payments.
    • Interest Rate - Deferred payments will carry interest that does not exceed the interest rate in the loan contract. It is important to emphasize that postponing a loan payment is like taking out a new loan at the amount of the deferred amount.
    • How to distribute loan payments - Mortgages will be spread over the entire balance of the loan period, and consumer credit and the payment business will generally be deferred until the end of the loan period.
    • Period for applying for deferral of payments - You can apply to the Bank for deferral of loan payments, according to this outline, until 31.7.2020.
  • 21.04.2020 - Facilitating Housing Loans Given the Corona Crisis - aimed to reduce the effects of the corona crisis on mortgage and all-purpose creditors (in a mortgagor). These include: 
    • Relief of Limitations on Housing Loans for Unpaid Vacation Workers - Due to the Corona crisis, many workers were expelled to the Unpaid Vacation, and their income was reduced accordingly. Threshold of PTI/DSR (which stands at 50% of both borrowers' income) may be barred for them from obtaining a mortgage, and in some cases blocked from meeting existing purchase obligations. The Temporary Order provides that, if a number of conditions are met, the banks may provide mortgages according to the borrower income prior to their Unpaid Vacation.
    • Reduction of the additional 1% capital requirement for housing loans that are applied during the Corona crisis (until 30.09.2020 unless will extended by the BoI).
  • 21.04.2020 - Facilitating Housing Loans Given the Corona Crisis - aimed to reduce the effects of the corona crisis on mortgage and all-purpose creditors (in a mortgagor). These include: 
    • Relief of Limitations on Housing Loans for Unpaid Vacation Workers - Due to the Corona crisis, many workers were expelled to the Unpaid Vacation, and their income was reduced accordingly. Threshold of PTI/DSR (which stands at 50% of both borrowers' income) may be barred for them from obtaining a mortgage, and in some cases blocked from meeting existing purchase obligations. The Temporary Order provides that, if a number of conditions are met, the banks may provide mortgages according to the borrower income prior to their Unpaid Vacation.
    • Reduction of the additional 1% capital requirement for housing loans that are applied during the Corona crisis (until 30.09.2020 unless will extended by the BoI).
  • 21.04.2020 - The Banking Supervision Department (BSD) published a guidance regarding the implementation of requirements set in Reporting Directives, on accounting treatment of borrowers who temporarily encounter payment difficulties due to the COVID-19 crisis. The BSD encourage banks and credit card companies to act in a prudent and proactive manner to mitigate temporary adverse impacts on households and businesses which are affected by COVID-19, in line with the long term interest of the banks, their borrowers and the overall economy. In addition, the BSD provide guidance regarding troubled debt classification, and clarifies that short term loan modifications (for example, 6 months), such as payment deferrals, late fee waivers, or extensions of repayment terms, do not automatically result in a troubled debt restructuring classification of loan modifications. The statement is similar to recently published guidance by regulatory agencies in the US and the world.
  • 21.4.2020 - Disclosure Guidance and Highlights for public reports for the first quarter of 2020.
  • 19.4.2020 - Clarifications regarding the Supervisor’s guidelines related to suspending account restrictions in respect of checks without cover, in order to avoid the negative impact on customers whose income has decreased markedly and who are liable to become restricted customers. However, it is important to note that these guidelines do not cancel the restrictions (it is only a suspension) and that checks that currently are not counted toward the imposition of a restriction are liable to lead to a restriction at the end of the suspension period. 
  • 2.4.2020 - Leniencies in adding customers to remote execution of transactions and in issuing debit cards to customers.
  • 29.3.2020 - Reducing capital requirements for banks and directing them to examine the distribution of dividends to increase credit supply to the economy - Since the outbreak of the crisis, the demand for credit has risen sharply, and at the same time, the level of risk in providing credit has increased, given the deterioration in the economic situation of businesses and households. In order to ensure the ability of banks to continue to offer credit, the BSD announce the reduction of regulatory capital requirements by one percentage point, so that the minimum requirement will chance as following:
Minimum capital requirement
31.12.2019 (prior reduction)* From 29.03.2020 till 30.09.2020**
From 30.09.2020 till 30.09.2022**
CET 1 9% or 10% (large banks) 8% or 9% (large banks) Minimum requirement will stand at the lower between (1) actual capital ratio at 30.09.2020 or (2) original capital requirements.
Total capital 12.5% or 13.5% (large banks) 11.5% or 12.5% (large banks)
  • 6.04.2020 - Reduce interest rate by 0.15 percentage points to 0.1% and other monetary measures– 
    • The Bank of Israel offers banks a plan to increase the supply of credit for small and small businesses - The program will amount to NIS 5 billion. The Bank of Israel will provide the banking system with fixed-rate 3-year loans at a rate of 0.1%, with the aim of increasing the bank's credit supply to small and small businesses, and helping them to cope with the Corona crisis and return to full activity when possible.
    • The Bank of Israel expands the repo tool to include corporate bonds as collateral - the Bank of Israel will, in addition to government bonds, also receive corporate bonds rated AA or higher, as part of the repo transactions with the financial institutions. The purpose of expanding the range of collateral is to allow flexibility for authorized entities to use this tool and to ensure the Bank of Israel's ability to support the shekel liquidity in a financial system.
  • 15.03.2020 - 23.03.2020 - The Bank of Israel purchases NIS 50 billion in government bonds to ease credit conditions in the economy and support economic activity. Concurrent with the bond purchase program, the Bank of Israel will continue to allow financial entities to execute repo transactions with it using government bonds as collateral as announced on March 15, 2020, as well as the NIS dollar exchange rate tender program announced by the Bank of Israel on March 18, 2020.

* On top of this will be added additional 1% on mortgage loans/total RWA.

** On top of this will be added additional 1% on mortgage loans/total RWA except mortgages provided in the period from 29.03.2020 till 30.09.2020.

Other measures and sources

  • Flexible payments for electricity bills. 
  • Freezing enforcement actions, including new foreclosures and the postponement of outstanding foreclosures. 
  • Reducing the enforcement of by-laws within certain local administrations vis-à-vis businesses. 
  • Creating a network of local authority’ representatives, for peer learning and communicating “field” knowledge to the Ministry of Economy, and vice versa. 

Main sources of information:

  • Government of Israel
  • Israel: Extensions of tax-related deadlines (COVID-19)
  • Cyber Marketplace - The corona epidemic that created a new world reality. As part of dealing with the epidemic, many organizations are expanding the usage of digital platforms. In order to minimize the cyber risks involved with this movement of many organizations, at this time of need, the INCD created a – Marketplace - a meeting place between the open market and cyber security products, services and solutions.
    Designating Cybersecurity Firms as Emergency Service Providers

Main sources of information:

Contact us

Tax: Dina Pasca-Raz – dpasca@kpmg.com
Regulatory and risk content: Evgenia Kremer – ekremer@kpmg.com