In recent weeks, Daphna Ravid-Barzilai, CPA, Managing Partner at Barzilai & Co., who serves as Vice President of the Institute of Certified Public Accountants and Chair of the Institute's Non-Profit Organizations Committee, has been leading the fight alongside civil organizations against the Israel Tax Authority's decision regarding non-profits" participation in tenders published by the state (see previous memo dated 25.8.2022).
This is a decision that, in our understanding, embodies discrimination against non-profits, flawed regulation, and unnecessary bureaucracy. Furthermore, the decision has created uncertainty regarding the criteria for reviewing non-profit activities.
We are pleased to inform you that following our joint efforts, the Civil Leadership Association has reached the following understanding with the Tax Authority:
A joint working group of representatives from the organizations and the Tax Authority will be established to examine the current criteria for classifying non-profit activities.
The criteria established for the "Green Track" will not serve as a basis for determining the classification of the activity in the tender.
3. The request for preliminary approval will be easy and available on the Tax Authority website and will include only technical details.
4. An organization that submits its request for approval after the set deadline (45 days before bid submission) must accompany the submission with a justification.
5. The examination of the certifications will be done on a sampling basis, and decisions to classify an activity as business will only be made by the Deputy Director of the Tax Authority.
Here is the recommended course of action:
- For any non-profit organization intending to submit a bid in a tender published by the state, submit a request to the professional division at VAT and ask for its approval that it is a non-profit organization for the purpose of the tender.
A. A request must be submitted for each tender separately, and the term "State" includes the other entities listed in Section 2(a) of the Tenders Law.
B. The request must be submitted through the tax decisions system on the Tax Authority website. - Please attach to this message:
a. Description of the existence of a tender, tender forms, and an explanation regarding the service the non-profit organization is expected to provide.
Non-profit organization certificate.
C. Valid certificate of proper management.
Business registration certificate.
h. Approval under Section 46, if applicable. - The request must be submitted to the Professional VAT Division through the Tax Authority's website's Tax Decisions system. We are at your disposal to assist with submitting the request and to provide confirmation for the tender committees regarding its submission.
Regarding the "Green Track" – a nonprofit organization that meets the criteria of the Green Track, if one exists, should carefully consider whether to apply through the Green Track or through the avenue described above. The reason is that, in our opinion, through the Green Track, the nonprofit organization undertakes commitments that it is questionable whether it is advisable for it to take on.
It should be emphasized that the understandings reached as described above are an important achievement, but the road is still long. The lack of clear rules and the contradiction between the tax authority's policy and the policies of the ministries publishing the tenders create uncertainty that has not yet been resolved. We will continue to work towards regulating the issue and will keep you updated.
