Israeli Tax Authority Eyes Tax on Business Credit Card Reward Points Used Privately

Many Israeli self-employed individuals have long used business credit cards to pay for expenses, accumulating reward points redeemed for personal benefits like flights or shopping vouchers. However, the Israeli Tax Authority now signals it may tax these benefits, arguing that if a business expense generates a private advantage, that advantage should be taxable. The authority emphasizes the need to distinguish between business and personal benefits, including credit card points.

The practical challenge lies in the fact that most people do not maintain separate credit cards for business and personal use, making it nearly impossible to track which points were earned from business expenses versus personal spending. Additionally, the value of reward points is ambiguous since they do not equate directly to cash and sometimes do not offer actual savings compared to other purchase options.

Accountant Ariel Petel highlights that without a clear, implementable method, such as a tax exemption threshold, a simple calculation mechanism, or automatic segregation by credit card companies, this policy could impose significant administrative burdens on thousands of self-employed individuals already struggling with complex reporting and tax payments. While taxing private benefits is understandable, expecting business owners to account for every point earned is impractical. Petel, a former vice president of the Israeli Association of Independent Accountants, calls for a workable solution before enforcement.

The article underscores the tension between tax fairness and administrative feasibility in the evolving landscape of business expense benefits in Israel.