Your Taxes: How Israeli businesses can claim compensation for protection money damage

This approach is part of a short-term pilot scheme authorized by Government Resolution 4299, acknowledging that many business owners in Israel are likely affected. The scheme applies to protection money damage incidents occurring between October 4 and December 4, 2026. The cost of the pilot scheme is budgeted at NIS 35 million.

Claimants must be owners of a lawful business with a business license and an active income tax file, whose business property or home was hit after refusing to pay protection money or after filing a complaint with the police. This applies to damage inflicted in Israel, including the West Bank’s Area C.

Claims are possible for direct damage, but not indirect damage such as third-party claims. Other war damage compensation rules also apply. The aim is to restore the situation to what it was before the incident. This aim means compensation up to the second-hand value after wear and tear, not the new reinstatement cost.

Compensation would be calculated at the lower of: either the difference between the value after the incident and the second-hand value before the incident, or the cost of restoring the asset.

Assets are generally valued on the basis of what a willing buyer would have paid a willing seller on the date of the incident. Household contents are valued according to limits in special regulations. No compensation is possible for art, jewelry, cash, or insured items.

The property tax director has sole authority for deciding whether and how much compensation a claimant may receive. No right of appeal is mentioned. The director is not bound by the Police confirmation of damage caused.

Repairs must not be carried out before filing a compensation or before a property fund assessor has inspected the damage.

First, confirmation from the police that the damage was caused to a protection money victim and that the victim’s business isn’t linked to organized crime.

Second, a signed declaration waiving confidentiality and consenting to send details of affected assets to the property compensation fund.

Third, a valid business permit.

Fourth, if a building was damaged, a building permit and proof that the building was built in line with the permit.

Fifth, confirmation or proof that there is no malicious damage insurance cover, or refusal to pay out, from the insurance company. The business must declare it won’t claim any insurance or other payout over and above the government compensation.

Sixth, confirmation of the value of the damaged property or other asset, such as tax form “Yud Alef,” original purchase invoices, insurance survey, and any other relevant documentation.

Seventh, confirmation that any precautions requested by the insurance company before excluding the asset were met.

After lodging the claim, the claimant should receive a case number by SMS and email.

The property compensation fund assessor will inspect the damage and submit its own report of the damage, whether the asset appears on the tax form Yud Alef, and whether it is supported by purchase invoices or any insurance survey. The claimant is required to be cooperative.

Any compensation payout will be gradual over the restoration period.

It would be preferable to stop the criminals demanding protection money – not just compensate victims who stand up to the criminals. The announcement refers to business owners; it is not clear if that includes company shareholders.

Generally, no Israeli tax is expected on compensation, but check the situation abroad.

The government seems keen to shut out false compensation claims by criminals and fraudsters, hence the red tape. In short, if your business took a hit from protection-money criminals, hurry to claim any compensation due before the NIS 35 million budget runs out.

As always, consult experienced professional advisers in each country concerned at an early stage in specific cases.