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Latest Updates / Tax
May 8, 2016
Things you need to know about stock options
How options are being used as a tool to address start-ups’ challenges in recruiting, incentivizing, and retaining quality employees.
We recently published an article on the IDC Legal Clinic for Start-ups website, reviewing the basic concepts of stock options, the process of adopting a stock option plan, and the various routes available for companies to implement it.
April 12, 2016
Taxation of E-commerce: Israeli Tax Authority Issues New Circular
A few weeks ago, the ITA published a new circular which provides guidelines for the taxation of foreign corporate entities operating in Israel via the internet
March 6, 2016
Pending tax changes to short term apartment rents
The Israeli Tax Authority (ITA) recently announced, during a discussion of the parliamentary committee, that it is about to publish a tax circular in the matter of renting apartments for a short periods of time, including through Internet platforms such as Airbnb.
According to recently released data, In 2015 about 128,000 tourists visiting Israel rented apartments through Airbnb. This represents an increase of 45% compared to 2014, as well as an increase of 40% in the number of Israelis who offer their apartments for rent through Airbnb, which is now over 13,000.
February 21, 2016
Airbnb users may face a new tax reality
In the last few years the Airbnb platform has become a significant player in the tourist market, with a user base growing at 40% at the last year. Thousands of Israelis rent out their apartments through Airbnb and earned an amount equivalent to a monthly salary. The ITA has (until now) not been proactive in enforcing the taxability of such income.
Adv. Harel Perlmutter was interviewed for the Ynet website and spoke about the new tax rules that may change this trend.
January 5, 2016
A precedential judgment in the matter of transfer pricing shuffles the cards as to granting options to employees
A judgment in the Contira case was handed down two weeks ago in the district court which dramatically changes the Cost Plus issues relevant to certain Israeli companies which provideservices to a foreign relatedcompany. The judgment impacts on the situation where the Israeli company’s employees are granted options in the framework of Section 102 of the Income Tax Ordinance (capital track).
November 29, 2015
Employee or independent? Ways to save money at the fast approaching end of the tax year, 2015.
What can the taxpayer do to take advantage of available tax breaks and allowances?
Tax experts, including adv. Harel Perlmutter, discuss these issues on Ynet.
November 26, 2015
Israel signs OECD Automatic Tax Information Exchange Agreement
Israel signed the Organization for Economic Cooperation and Development’s Multilateral Competent Authority Agreement (MCAA) to facilitate the automatic exchange of financial information, boosting the number of signatories to 91 and enhancing the global efforts against tax evasion, the OECD announced.
Harel Perlmutter was interviewed by Bloomberg BNA about this agreement.
November 8, 2015
New law Memorandum: New tax incentives for public high-tech companies and investors
In order to promote the technology and biomedical industries and to restore the Israeli stock exchange to its position as an efficient and attractive arena for capital raising to companies, an ad hoc committee was formed to analyze feasible tax incentives.
November 3, 2015
Israel and Australia in tax treaty talks
The Israel Tax Authority is negotiating a treaty for prevention of double taxation with Australia.
Adv. Harel Perlmutter, who specializes in international taxation at the Barnea law firm, believes this progress is "wonderful news. Israel and Australia have excellent economic and political relations, and Israeli investment in Australia has tripled over the past three years. At the same time, no significant talks have yet taken place on a tax treaty between the countries. This lack of a treaty sometimes brings about situations of double taxation and uncertainty, together with problems of withholding tax in trade and business, especially among Israeli companies seeking to operate and invest in Australia, and vice versa."
September 7, 2015
Israel Tax Authority extends voluntary disclosure program
As expected, the Israeli Tax Authority has decided to extend the temporary order regarding anonymous Voluntary Disclosure.
The Israeli Tax Authority announced that the temporary order regarding voluntary disclosure, which was supposed to expire on September 6, 2015, has been extended.
The temporary order was published a year ago and was limited to one year. The regular procedure has been restricted until 31/12/2016.
In total, last year 3290 requests were submitted, about 60% of them anonymous. In light of this success, it was decided to extend the duration of the temporary order.
Additional information regarding the dates will be announced later.
August 30, 2015
New ITA circular, Aug 2015
On August 16, 2015, the Israel Tax Authority published a new circular (number 8/2015), which is effective immediately. The circular presents the new material requisite tests and criteria for recognizing an organization as a ‘public institution’ pursuant to section 46 of the Israeli Income Tax Ordinance. Certification issued to an organization pursuant to section 46 of the Income Tax Ordinance confers a tax benefit, by way of tax credits to donors in respect of donations they grant to that organization, at a rate of 35% for an individual donor and 26.5% for a corporate donor (according to the corporate tax rate).
April 13, 2015
Taxation of e-commerce in Israel – income tax perspectives according to a draft circular of the income tax authority
The Israeli Tax Authority (ITA) published a draft circular concerning the taxation of foreign corporations that derive income from the provision of services via the internet to Israeli residents.
Such circular was published due to the need of the ITA to provide an interpretation of the Israeli tax legislation, in respect of income derived from e-commerce, so as to accommodate the substantial e-commerce activities taking place in or via Israel. The current definitions and rules, which relate to terms such as permanent establishment or place of doing business, have been commonly used in respect of brick and mortar businesses, and the need has arisen to provide an interpretation for such terms so as to allow them to appropriately be applied to the digital economy.
December 25, 2014
Zero% VAT on medication acquired for clinical trials in Israel
The new VAT amendments will lower the cost of clinical trials on humans in Israel. The amendment to the VAT legislation is expected to benefit international companies which conduct clinical trials in Israel.
Adv. Harel Perlmutter, who specializes in international taxation at Barnea Co., was interviewed to Globes and stated that: "the new amendments will have two major implications – Firstly when the Israeli company acquires the medication from an overseas company, the Israeli company will not have to pay VAT or Customs Duty in Israel (the Israeli company will usually pass on these costs to the overseas company). Secondly, when the Israeli company charges fees for its services to the overseas company for doing the trials, the Israeli company will charge VAT at zero per cent."
November 30, 2014
Court decision on temporary residence abroad
On 21 October 2014, the Haifa District Court handed down its decision in “Yael Zor v the Tax Assessor Haifa” concerning temporary residency abroad. The case relates to a senior employee of a multinational enterprise the shipping company, Zim, who worked in Hong Kong for a subsidiary of the group from January 2006 to August 2008.
October 21, 2014
A potential new double taxation agreement with Switzerland?
Tax treaties are intended to promote international trade by eliminating double taxation. Although the Israeli Tax Authority and the Israeli Ministry of Finance have been reluctant to acknowledge a potential new double taxation treaty with Switzerland, the Swiss Finance Ministry has been more vocal. Swiss officials have confirmed that in recent weeks negotiations were indeed held with the Israeli tax authorities in connection with such proposed treaty between the countries.
October 13, 2014
Recent Tax Developments
Two pending amendments to Israeli tax legislation will, if adopted, permit the exchange of information about taxpayers in a multinational context. The passing of these amendments will also allow for implementation of multilateral agreements for ‘exchange of information’ regarding individuals and corporate tax payers.
September 18, 2014
The law for the Encouragement of Capital Investment- New Amendment is expected
Since its enactment in 1959, the law for the Encouragement of Capital Investment is one of the most significant and meaningful means for the growth and development of the Israeli economy and its industry.
September 7, 2014
Israel - Revision Voluntary Disclosure Tax Amnesty
The Israeli Tax Authorities have recently been very active in its efforts to detect tax evaders and unreported global income of Israeli tax residents. On the 7th of September a New Voluntary Disclosure Program, replacing the previous program, went into effect.
August 28, 2014
Israel and the Republic of Germany sign a new tax treaty
Israeli Finance Minister Yair Lapid and his German counterpart, Wolfgang Schäuble, signed a revised tax treaty in Berlin on August 21, 2014. The convention, which was last amended in 1977, has been adapted to make it correspond to modern international tax law and current economic relations between Israel and Germany.
June 25, 2014
Supreme Court dismisses petition to impose VAT on international corporations
About a month ago, the Israeli High Court of Justice deliberated a case petitioning the court to order the Minister of Finance and the Director of the Israeli Tax Authority to impose value added tax on multinational companies, such as Google and Facebook, arguing that they are providing services and selling goods in Israel via the internet, without being required to pay VAT, which gives them an unfair advantage over Israeli competitors.
The petitioner pleaded that the multinational corporations are conducting extensive business activities in Israel, which include, inter alia, marketing and communications in Hebrew with Israeli customers and payment in Israeli currency. The petitioner also argued against the “location of the server” criteria that the Israeli Tax Authority is using in order to ascertain whether a transaction via the internet is executed in Israel.
The court dismissed the petition and stated that it is premature, given that the VAT authorities are drafting a circular on the said subject, which is expected to be released soon. The dismissal of the petition does not conclude one way or the other the issue of VAT liability, as this issue will surely be the subject of legal proceedings in the future.
Nevertheless, the question of tax liability is only one aspect of internet activities. There are many issues, including slander, consumer protection, gambling, forex, pharmaceuticals, protection of privacy and copyrights, which are arising in relation to internet activity. In relation to all of these, the fundamental question is which legal system will determine whether any given action is legal or not. Of course, these issues are not unique to Israel, and significant progress has been made, and some judicial rulings on these questions have already been issued, in various countries.