Israeli Tax Authority Targets Private Use of Business Credit Card Rewards as Taxable Income

The Israeli Tax Authority has signaled that private use of reward points accumulated from business credit card expenses may be considered taxable income. According to the authority's position, when a business owner uses points earned from tax-deductible business expenditures for personal benefits such as family vacations or upgrades, the value of those benefits could be treated as additional taxable income. Accountant Ariel Petel explained that this approach is based on the principle that if a business expense generates a private benefit, it should be subject to taxation to separate business activity from personal consumption.

However, Petel warned that implementing this policy would impose a heavy bureaucratic burden on business owners and accountants. Many business credit cards are used for mixed expenses, including business purchases and personal spending, making it difficult to track the origin and value of each reward point. Additionally, determining the exact monetary value of points is complex since points do not directly equate to cash and their redemption value varies depending on availability and conditions.

Petel urged the Tax Authority to introduce a simple, uniform mechanism to address this issue, such as a tax exemption threshold, a fixed calculation rate, or automatic segregation of points by credit card companies. Without such measures, he said, the policy would remain largely theoretical and create unnecessary friction with self-employed individuals already managing complex tax reporting. Petel summarized that while taxing private benefits from business expenses is understandable, expecting business owners to treat every credit card point as a detailed accounting investigation is unrealistic.