Compensation Framework for “Operation Roaring Lion”

We would like to bring to your attention that on May 4, 2026, the Economic Assistance Program Law (Temporary Provision) (Support for Businesses and Public Institutions), 5786–2026 (the “Law”) was published. The purpose of the Law is to provide relief to businesses and public institutions throughout Israel that have suffered indirect damages as a result of Operation “Roaring Lion”, which commenced on February 28, 2026. The Law defines the months of March–April 2026 as the primary eligibility period for compensation for businesses that meet the qualifying criteria, as detailed below, all with the aim of ensuring the continued functioning of the Israeli economy.

Please click here to view the full text of the Law.

It should be noted that businesses located in border-area communities that have suffered damage are entitled to file claims for full compensation for indirect damages under the “Red Track.” In addition, please note that the legislation concerning the northern communities affected by Operation “Roaring Lion”, which are not included in the list of border communities, has not yet been approved. Should this legislation be enacted in the future, these communities will be able to choose the most appropriate track for submitting a compensation claim.

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General Eligibility Criteria for Compensation

In order to qualify for compensation, the following cumulative conditions must be met:

• Turnover – Annual turnover must range between NIS 12,000 and NIS 400 million. Businesses with turnover below NIS 12,000 or above NIS 400 million are not eligible to apply for compensation under this Law.
• Decrease in Turnover – A decline of at least 25% in turnover during the eligibility period compared to the base period (as defined below).
• Causal connection – The decrease in turnover must result from indirect damage caused by Operation “Roaring Lion”.
• Commencement of Business Activity – The business must have commenced operations (and reported such commencement to the Israel Tax Authority) prior to March 1, 2026.
• Proper Bookkeeping – The business must maintain proper bookkeeping records for the year 2026.
• Filing of Periodic Reports – The business must have filed periodic VAT returns for both the base period and the eligibility period.

 

►Who is not eligible for compensation?

The State; budgeted public bodies; health corporations; health funds (HMOs); public institutions that do not qualify as an “eligible public institution”; statutory corporations; financial institutions; businesses engaged in agriculture; entities whose business activity consists of selling rights in real estate as business inventory; entities for which more than 50% of their of their activities in 2024/2025 consisted of long-term projects (i.e., projects exceeding one year); as well as businesses that were closed, inactive, or reported zero turnover during the four months preceding the commencement of the operation.

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Baseline Period and Eligibility Period

As applied in previous compensation frameworks (during “Iron Swords” and “Am Ke-Lavi”), this proposal also distinguishes between reporting methods and the business’s location for determining the relevant periods used to calculate compensation.

Eligibility Period (the period during which the damage occurred):

• General rule applicable to most businesses: March–April 2026.
• Businesses reporting on a cash basis and execution contractors: May–June 2026.

Baseline Period:

• Businesses nationwide: The corresponding period in 2025.
• “Special dealers (special VAT-registered taxpayers)” – The corresponding period in 2022. Under the Law, a “special dealer” is defined as a VAT-registered taxpayer whose business is located in an area that was affected during the period March–June 2025 (primarily communities in northern Israel), as well as a VAT-registered taxpayer who hosted residents evacuated from affected communities.
• New businesses (opened after the above baseline periods): Specific calculation mechanisms apply, based on the average turnover from the date the business opened until February 2026.
• Self-employed individuals – Self-employed individuals who served in reserve duty (or whose spouses served in reserve duty), or who were on maternity leave during the base period, may apply to the Tax Authority for their compensation to be calculated based on an alternative period during which they were operating under normal conditions.

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Compensation Tracks – Operation “Roaring Lion”

“Grant Track” – Track for Businesses with an Annual Turnover Between NIS 12,000 and NIS 300,000

Businesses with annual turnover ranging between NIS 12,000 and NIS 300,000 will be entitled to a fixed grant, calculated based on the rate of decline in their turnover. The table below sets out the final compensation amounts (in NIS) according to the percentage decrease in turnover:

Annual Turnover (NIS)	Base Amount	25%-40% Decrease	40%-60% Decrease	60%-80% Decrease	80% and above
12,000–50,000	1,864	1,864	1,864	1,864	1,864
50,000–90,000	3,356	3,356	3,356	3,356	3,356
90,000–120,000	4,475	4,475	4,475	4,475	4,475
120,000–150,000	2,823	2,823	4,235	6,775	8,469
150,000–200,000	3,329	3,329	4,994	7,990	9,987
200,000–250,000	4,261	4,261	6,392	10,226	12,783
250,000–300,000	4,980	4,980	7,470	11,952	14,940

Note: The amounts set forth in the table should be multiplied by two, to reflect the two-month eligibility period.

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“Eligible Expenses Track” – applicable to businesses with annual turnover ranging from NIS 300,000 to NIS 400 million.

Compensation under this track is calculated based on the following components:

• Participation in salary expenses – This component is intended to assist in financing the salary costs of employees whom the business continued to employ during the hostilities, despite the decline in turnover. The compensation is calculated by multiplying the eligible salary expenses during the eligibility period by the rate of decline in turnover.
  
  “Eligible Salary” is defined as the lower of the following:
  1. 75% of the actual salary paid to an “eligible employee” (as reported in Form 102 submitted to the Israel Tax Authority), multiplied by 1.25; or
  2.The average wage in the economy (as of March 2026), multiplied by the number of eligible employees and then multiplied by 1.25.“Eligible employee” – an employee in respect of whom the claimant has declared that their employment was not terminated during the eligibility period, or an employee whose employment was suspended during March for a period not exceeding 10 days (and such suspension was reported to the National Insurance Institute by April 28, 2026), provided that their employment was not terminated during April.
  
  Note: Salary expenses should be reduced by payments made for vacation days taken by the employee, as well as by reimbursements received from the National Insurance Institute in respect of reserve duty.

• Participation in fixed expenses – a calculation based on the “fixed expenses coefficient” and the business’s current inputs in the year preceding the damage.
  Calculation formula: the total current inputs in the preceding year divided by six, multiplied by the fixed expenses coefficient.
  The fixed expenses coefficient is determined according to the rate of decline in turnover, as follows:
  25%–40% decline – coefficient of 7%
  40%–60% decline – coefficient of 11%
  60%–80% decline – coefficient of 15%
  More than 80% decline – coefficient of 22%

• Certain sectors are subject to different coefficients as determined by the Law. For example, the fuel sector is assigned a coefficient of 0.35, exempt dealers (small businesses not registered for VAT) a coefficient of 0.19, and contractors a coefficient of 0.68.
  Compensation Cap (amounts should be multiplied by two to reflect the two-month eligibility period):
  – Businesses with turnover of up to NIS 100 million – NIS 600,000.
  – Businesses with turnover between NIS 100 million and NIS 300 million – NIS 600,000 plus 0.3% of the turnover exceeding NIS 100 million.
  – Businesses with turnover between NIS 300 million and NIS 400 million – NIS 1.2 million.

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Additional Compensation Tracks

• Compensation for direct damage to business premises – A claimant who has sustained direct damage to its business premises or property during the eligibility period, and is unable to use such premises or property for an extended period (at least until June 30, 2026), will be entitled to an expanded compensation track for indirect damages for additional periods (May–June 2026, July–August 2026, and September–October 2026). For individuals, this compensation also includes reimbursement for loss of taxable income (up to NIS 30,000 per month).

 

• Compensation for individuals for loss of rental income – Property owners (who are not VAT‑registered) whose residential property has suffered physical damage will be entitled to compensation equal to the last rent paid for the period during which the property cannot be used (the rehabilitation period), provided that all of the following cumulative conditions are met:
  – The property was leased at the time the damage occurred or during the three months preceding the damage;
  – Due to the damage, the property cannot be used for a period of at least one month;
  – It has been demonstrated to the Tax Authority that no rent was paid during the rehabilitation period.

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Advance Payments

• As of May 5, 2026, applications for advance payments may be submitted online via the Israel Tax Authority’s website.
• According to information published by the Israel Tax Authority, businesses that previously received compensation or an advance under the “Eligible Expenses Track” in connection with Operation “Am KeLavi” or the “Iron Swords” war, may request an advance of up to 80% of the compensation or advance previously approved for them.
• Businesses that submitted a claim under the Eligible Expenses Track in the past but did not receive compensation or an advance will not be eligible to request an advance, and may only submit a final claim. By contrast, businesses that have not previously submitted a claim may request an advance of up to 80%, based on the 2025 inputs formula.
  For additional information regarding the advance payment track, please click here.
  Notwithstanding the above, and in accordance with the provisions of the Law, the Tax Authority may approve an advance payment of up to 50% of the claimed amount based on the claimant’s declaration.

► Please note: Payment of an advance does not constitute approval of the claim! The Israel Tax Authority may require repayment of any advance amounts paid.

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Filing a Claim

• As of May 17, 2026 (following the submission of VAT periodic reports for March–April), claims may be submitted online via the Israel Tax Authority’s website. Claims must be filed within 90 days from the end of the eligibility period.
• If a final decision has not been issued within 21 days from the date of submission, the Israel Tax Authority is required to pay an advance at a rate of 60% of the estimated compensation amount.
• In addition, if no decision is issued within 150 days from the date of submission, the claimant will be paid an additional advance of 10% of the estimated compensation amount.
• The Israel Tax Authority is required to issue a decision on a submitted claim within eight months. If no decision is issued within this period, the claim will be deemed approved.
• A decision of the Israel Tax Authority may be challenged by filing an objection (administrative appeal) within 60 days. The Israel Tax Authority will then have an additional eight months to issue a decision on the objection. A claimant wishing to further appeal the decision on the objection may file an appeal with the Appeals Committee within 60 days.

 

► The deadlines set forth in the Law are binding. However, in cases where a claimant has been unable to comply with such deadlines, exceptions may be considered. Please feel free to contact us, and we will review the options available to you.

 

Penalties Warning – The Israel Tax Authority is authorized to impose a penalty of 50% in cases of overstated claims, and a penalty of 40% in cases involving an artificial transaction or arrangement intended to increase the amount of compensation.

The Law also provides specific compensation arrangements and calculation mechanisms for kibbutzim and public institutions.

We will be pleased to offer you professional guidance and assistance with all matters required to obtain compensation for damages related to Operation “Roaring Lion”. We remain at your disposal for any questions or clarifications.

This client update does not constitute legal advice and should not be relied upon without obtaining appropriate legal counsel.