A statement of capital is a document that reflects the position of a person’s assets and liabilities in a specific date. The statement includes details about a person’s business and private capital, including his wife and children up to the age of 18. A statement of capital is a tool that allows the tax authorities to monitor a person’s declared income and check whether that person can explain the increase in his net capital between two specific periods.
Who is required to file a statement of capital?
Usually, only an independent business owner or shareholder of a company is required to file this declaration. In rare cases, the tax authorities can also ask an employee to file a statement of capital, in case of high-income employees or employees with exceptional economic activity.
A person is usually required to file a statement of capital around the time they start running their business. Afterward, the statement is filed regularly, every few years.
The first statement of capital
The first statement of capital is of great importance as it represents the basis of the economic value according to which a person’s assets and liabilities will be assessed upon filing the statement. Afterward, it represents the basis for comparing and examining changes in capital against the subsequent capital statements.
While it is important to be as accurate as possible while filing each statement of capital, the accuracy of the initial report is of critical importance.
For example, let’s say you own an asset that you received as a gift and forgot to mention its existence in the first statement of capital. If this property is sold for a considerable amount before you file the second declaration of capital, an unexplained capital increase will appear, which may result in fines applied by the Tax Authorities.
How to file a statement of capital?
The most important thing in filing a statement of capital is not to omit details from the capital declaration. Later, it may be difficult to explain your situation with reasons such as “I made a mistake”, “I forgot” or “I did not know”. It is important to ensure that you complete every column that may be of interest to the fiscal authorities without hiding anything.
The first step in filing a statement of capital is gathering in-depth information on all the assets of the declarant and his/her children, under the age of 18. These assets include cash, all types of investments, real estate assets, alternative investments, major expenses, business expenses, including holding assets in trusts for others or by others, etc. If this is the first time you are filing a capital declaration, it is important to go through all of the sections detailed in Form 1219 – Capital Statement. Also, make sure everyone is covered in the statement. Remember that withholding information can be problematic.
Reviewing the statement of capital
After filling this form, it is important to go through it and compare it to previous statements (if applicable). In the event that significant differences are found between income, expenditure, and changes in capital, it is mandatory to locate the source of the error before submitting the statement.
Is it worth submitting a statement of capital alone?
Since this is a particularly important statement that requires great attention to detail, in addition to knowledge and experience in analyzing the source of a capital increase, it is recommended not to submit a statement of capital without professional help, especially if it is your first statement.
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