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14.5. Interest and Penalties

Following the issue of Omnibus Tax Law, the previous fixed interest penalty of 2% per month for late payments of tax has been replaced by a reference rate plus a culpability factor.  In addition, the maximum period for all interest penalties is capped at 24 months.  The reference rate is provided by the regulation at the beginning of each month. There are 3 rates for culpability: (i) 0%, (ii) 5%, 10% and (iii) 15%.

The Omnibus Tax Law has reduced many of the fines imposed for disclosures or actions related to tax.  For example: (i) The fine for voluntarily admitting a deliberate non-disclosure (resulting in additional tax) during a tax audit, but before commencement of an investigation is reduced from 150% of the underpaid tax to100%, (ii) The fine for failing to issue a correct Tax Invoice is reduced from 2% of the tax base to 1% of the tax base, and (iii) The fine for a first time offender that negligently fails to submit a tax return or submits an incorrect tax return was 200% of any underpaid tax, but this provision is now deleted.