Broadening the Definition of “SMALL BUSINESS”
A legal opinion by Russell D. Mayer, Attorney at Law
Pursuant to a notice issued by the Bank of Israel, an amendment to the Banking Regulations (Customer Service) (Fees) came into effect on August 1. The amendment modifies the definition of a small business from a business with an annual turnover rate of 1 million NIS, to a business that has an annual turnover rate of 5 million NIS.
Ramifications of the amendment
The importance of the amendment is that the broadened definition of small businesses is the inclusion of more Israeli businesses which will be eligible for beneficial banking terms which are comparable or better than terms offered for large businesses rate for the same services.
How to actualize the eligibility to be defined as “small business”?
To actualize this entitlement, a business must submit an annual report (such as a V.A.T. report) to its bank demonstrating its business cycle does not exceed 5 million NIS per year.
Upon presentation of the report, the bank is required to change the business classification to that of a “small business” and, as a result, the terms which apply to that business.
It should be noted that the classification as a small business remains valid for one year only. In order to renew this classification, the business must present updated documents to the bank regarding the business cycle of the business for that year.
Also noteworthy is that the banks are required by the Banking Supervision Department to notify their business customers of the amendment and its ramifications so that they will be aware of the applicable benefits thereof.
Russell D. Mayer, Attorney at Law, is a partner of Livnat Mayer & Co. and a long-standing member of JBNF.
This article is not to be considered as a legal opinion. For legal advice, we suggest that you contact legal counsel directly.