Tax Authority Overruled in Galei Kinneret Hotel Compensation Dispute
The tribunal ruled the Tax Authority acted unlawfully by denying Galei Kinneret Hotel compensation for Iron Swords war damages, ordering a full payout.
The Indirect Damage Compensation Appeals Tribunal for Businesses has ruled in favor of Israel Canada Hotels, owner of the luxury Galei Kinneret Hotel in Tiberias, determining that the Tax Authority acted unreasonably and beyond its authority. The authority had denied the company compensation eligibility for Iron Swords war damages during November and December 2023.
The tribunal ruled that the Tax Authority unlawfully deviated from the statutory formula and the company's VAT reports by conducting an alternative, individualized calculation that deprived the hotel of its entitled compensation.
Compensation Dispute and VAT Reports
Following the outbreak of hostilities in October 2023, Israel Canada suspended its standard tourism operations and partnered with the Ministry of Tourism to host evacuated border-zone residents at the Galei Kinneret Hotel.
In May 2024, the company filed a compensation claim for indirect damages under the eligible expenses track for November and December 2023, amounting to approximately 364,000 shekels. According to official VAT reports, the company's drop in revenue during the qualifying period reached 25.5%, exceeding the statutory minimum threshold of 25%.
However, the Tax Authority performed a recalculation, determining that the revenue drop was only 23%, thereby nullifying eligibility. The tribunal emphasized that unless VAT reports are legally disqualified, the presumption of regularity stands.
The tribunal believes that the respondent did not act reasonably in this case, when it unlawfully deviated from the statutory formula and the appellant's VAT reports, choosing to perform an alternative calculation that lacks any anchor in jurisprudence.
Tribunal Ruling and Legal Precedent
Led by tribunal head Adv. Tamar Steiner and CPA Baruch Baruchi, the committee fully accepted the appeal and ordered the Tax Authority to pay the full compensation claimed, plus 10,000 shekels in legal costs.
The ruling stated that the compensation mechanism was designed by the legislator to rely on a simple, efficient formula based on dealer VAT reports, and that unauthorized alternative calculations undermine equality and statutory purpose.
