Equity Statement

Capital declaration for individuals, self-employed, controlling shareholders and those required to submit a capital declaration

foreword

If you are self-employed, the IRS may require you to fill out a capital declaration form. A declaration of equity is a form that examines how much you are worth in terms of equity, the tax authorities examine the scope of your assets and liabilities. The purpose of the capital declaration is to help tax authorities identify income not reported in annual reports. A capital declaration provides a complete picture to the tax authorities on the capital of the person filing the declaration.

What is a capital statement?

A form from the tax authorities that they send to taxpayers to fill out the form and send back, filling out the form provides a snapshot of the taxpayer's equity (filling) for a certain date.

Who is required to file a capital declaration? Or alternatively, from whom can the IRS request to file a declaration of capital?

The IRS can ask anyone to fill out a declaration of capital. Pursuant tosection 135(1)(a) of the Income Tax Ordinance, the Assessing Officer may require any person to comply.

What is the purpose of a capital declaration?

As stated above, the ultimate goal is to help the tax authorities identify unreported income. At the same time, it is possible to find out a lot of information about the person submitting a declaration of capital, it is possible to assess how much a person should be 'worth' and if a discrepancy or irrationality is found then the tax authorities can take various measures and ask questions.

Who usually receives a requirement to file a declaration of equity?

Usually, the requirement to fulfill is towards independent business owners and once every few years. However, not only self-employed persons are required to file capital declarations but employees can also be required. Usually, if an employee is required to submit a declaration of capital, then these are probably high-earning employees / owned a business / owned a business in the past / made large purchases of assets.

What is the content of a capital statement?

As stated above, the declaration should contain all of your assets, capital and liabilities. The capital statement is divided into two parts:

Under this section there are several main sections:

  • Property and liabilities in a business where no balance sheet is drawn up: fixed assets, current assets, cash register and banks, and liabilities.
  • Property and liabilities in the business in which a balance sheet is drawn up: investments in a private business, investments in a partnership, reputation, investments in corporations and other investments.

Under this section there are several main sections:

  • Real estate/agricultural property, receivables, cash and bank accounts, savings plans/ life insurance/ provident funds and non-traded securities, vehicles/ pilots/ boats and other vehicles, household contents, liabilities and payables.
  • Investments in securities and foreign currency: investments in securities traded on the stock exchange and mutual funds, investments and cash in foreign currency.
  • Safes.

What should be attached to a capital statement?

All documents on which the capital declaration is based, according to the following details: confirmations of balances, purchase invoices, will on received inheritance, depreciation form and others. Documents not related to the business, for example: confirmation of balances from banks and provident funds, redemption of savings plans and others. Of course, additional relevant documents should be added if necessary.

Should I fill out a capital declaration on my own?

It is indeed possible, but nevertheless it can get complicated and you may make mistakes that will cause you harm. Keep in mind that the less property and liabilities you have, the easier the difficulty in filling out the form and the lower the chance of error, the same thing is the opposite. Each has its own considerations, so this is not a black and white answer.

Our firm, Simon Accountancy and Economic Consulting, has been submitting capital declarations for over 30 years, ranging from taxpayers with few property to taxpayers with a lot of property. You are welcome to contact us so that we can assist you in submitting the equity statement.