Israel Launches Compensation Track for Businesses Targeted by Protection Rackets

Israel's Tax Authority has launched a new compensation program for business owners whose property has been damaged due to refusal to pay protection money. The pilot program allows eligible business owners to receive up to 2 million shekels for direct damages to their business premises or homes resulting from refusing to pay extortionate demands or from filing a police complaint. This initiative, based on a government decision, will initially cover damages incurred between September 24 and November 23, 2026. To qualify, businesses must be legal, possess a valid operating license, and have an active file with the Tax Authority. Compensation can be claimed for damage to structures, inventory, or equipment, as well as to the owner's residence. This pilot is an implementation of a plan first reported in June, allocating approximately 30 million shekels from the Ministry of Finance for compensating businesses affected by protection rackets. The mechanism, operated by the Tax Authority's Property Tax department, aims to address situations where businesses under threat struggle to obtain coverage for malicious damage from insurance companies. The program also seeks to reduce business owners' fear of reporting to the police or resisting extortionate demands.

Eligibility for compensation is conditional on several requirements. Business owners must file a police complaint recognized as related to protection racket extortion. They also need to demonstrate that they could not obtain insurance coverage for malicious damage, even if previously insured for such risks, or that their insurance claim was denied. Furthermore, business owners must show they adhered to the security and risk-reduction measures stipulated by their insurance provider. For structural damage, proof of lawful construction is required. Claims must be submitted to the Tax Authority's compensation fund within seven days of the damage occurring, along with necessary documentation. The Tax Authority emphasizes that repairs should not be made before filing the claim and a property appraiser's inspection, as premature repairs could invalidate the claim. Temporary measures like clearing glass and debris are permitted. The compensation covers only direct property damage, excluding indirect losses such as lost income from business interruption or third-party damages. The compensation ceiling is 2 million shekels, and claim processing may take up to eight months.