Can the Israel Tax Authority reduce or cancel interest and penalties on an overdue tax debt?

Israeli tax law separates the tax from everything that accrues on top of it. A late return draws a fixed monthly fine under Section 188 of the Ordinance, and unpaid tax draws consumer price index linkage plus statutory interest from the original payment date. Section 192 then hands the Director of the Israel Tax Authority discretion to reduce or cancel those add-ons where the delay had a reasonable explanation, such as serious illness, a bereavement, incorrect professional advice, or a genuine dispute later resolved in the taxpayer’s favor. Section 100 of the Value Added Tax Law 5736-1975 gives a parallel power for VAT fines.

Non-residents accumulate these charges most often because nobody told them a return was due on Israeli rental income or on a property sale. File first and apply second, since the assessing officer (pakid shuma) rarely grants relief while returns are still outstanding. The application goes to the assessing office that holds the file, written in Hebrew, with foreign documents translated and the specific cause of the delay set out rather than a general plea of hardship. State clearly what has already been paid. A refusal can be raised again within an objection or appeal against the assessment itself, and the guide to late filing penalties in Israel sets out the amounts at stake.

From the full guide: Late Tax Filing Penalties in Israel: Fines, Interest, and How to Fix a Missed Return

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