Northern Businesses Face Tax Authority Demands for Compensation Repayment

As the three-year mark of the "Iron Swords" war approaches, businesses in northern Israel are finding themselves in a new battle, not with Hamas, but with the Tax Authority. Despite the state having previously declared the economic damage from the war over, many businesses are now being asked to return compensation funds they had already received.

The Tax Authority reports that the compensation fund distributed approximately 5.8 billion shekels to businesses affected by the war. Of this, nearly 4 billion shekels went to businesses in the frontline communities that were evacuated for about 18 months. Now, the authority is demanding the return of about 238 million shekels from 3,751 business owners who received compensation or advances, with roughly 184 million shekels sought from around 3,000 businesses directly on the front line.

These demands are causing significant hardship. One small tourism business owner in the north, who received a 56,000 shekel advance on a 70,000 shekel claim, was subsequently asked to return 36,000 shekels of the amount already received. Out of 121,000 claims filed in the north, about 100,000 were approved, but approximately 9,500 were rejected, with another 2,540 appeals also denied. Hundreds more claims are stuck in appeals processes, and over 2,000 await full review.

Local authorities are also pushing back. The Kiryat Shmona municipality has formally requested the state extend the period of recognition for indirect damages to businesses, arguing that the economic impact continues despite the state's official end date of February 28, 2025. Business owners report ongoing struggles, taking out loans to stay afloat, and now fear further demands for repayment.