Client updates / Tax

On September 17, an amendment to the Income Tax Rules (Relief in Issuance of Shares to Employees) was officially published, approximately 20 years from the last amendment. The amendment will enter into force on January 1, 2025 and will mainly affect the processes of approving equity incentive plans and of reporting to the Israeli Tax Authority.

The district court’s position in its recent ruling in the Ahuzat Allenby Ltd. case has significant implications for investors, developers and private individuals who purchase apartment buildings slated for demolition and are looking to change the zoning of the purchased properties.

The amended regulations, expected to come into effect in August 2024, improve the tax benefit track for new immigrants who are purchasing a first residence and are more lenient than the purchase tax track to which every Israeli resident is entitled when purchasing a first residence.

Under what circumstances will a court rule a transaction is an artificial transaction for tax purposes? In the case of Shalam Packaging Products Group, the district court rejected the tax assessor’s claims and ruled that the group’s restructuring was a legitimate business action and that the group did not execute the restructuring merely to reduce tax liabilities.

An Israeli court ruled that the Israel Tax Authority overcharged apartment sellers who rented out their apartments under the tax-exempt track up until their sale, by a total of more than ILS 100 million. This ruling has major consequences, since the State treasury will be forced to refund the tax overcharges to the apartment sellers who are part of the relevant class. The Israel Tax Authority is expected to appeal the ruling.

Signing a prenuptial agreement has a critical impact not only on the division of property upon divorce, but also on the taxes a couple pays during marriage. It is important for couples to understand the economic advantages inherent in signing a prenuptial agreement and draw one up accordingly.

A tax assessment dispute in Israel has led to a new court ruling dealing with relationships between subsidiaries in a multinational group and classification of the nature of the business activities that the companies provide to each other.

The purpose of the draft bill is to increase transparency in the Israeli tax system in order to avoid a negative assessment of the State of Israel by the Global Forum for Transparency and Exchange of Information, as well as to increase efforts to combat unreported capital.

The Supreme Court noted that, by its nature, the essence of a brokerage transaction is joining two parties into one transaction. Therefore, treating the transaction as providing a service to each party separately—a foreign resident and an Israeli resident—does not reflect the true economic essence of the service.

As a rule, employers in Israel that provide company cars for their employees’ use must attribute income to those employees in accordance with the imputed value of the use of the car prescribed in the Income Tax Regulations. Moreover, even if the car was in the employee’s possession for only part of the month, employers must attribute income to the employees for the full imputed value of the use of the car. However, the Israel Tax Authority has issued new special instructions because of the Swords of Iron War.

The IIA’s funding tracks for proof of concept (PoC) give breathing room to fledgling entrepreneurs and ventures during their efforts to transform an idea into a product, even before outside investors are considered.

After lengthy discussions, the Knesset approved a wartime compensation outline for businesses. The outline offers compensation of up to a maximum of ILS 1.2 million to businesses with annual turnovers ranging between ILS 12,000 and ILS 400 million.

Legitimate tax planning or an artificial transaction to reduce tax liability? Israeli court ruling on a dividend distribution prior to a sale of shares or holdings of a company.

The Israel Tax Authority is publishing a series of tax reliefs to help companies and individuals and the current defense and civilian efforts.

Israel’s new “Angels Law” grants tax benefits to investors in Israeli startups, and in the Israeli high-tech industry in general, with the goal of spurring the growth of high-tech companies based in Israel or whose intellectual property is registered in Israel.

For the first time, the Israel Tax Authority has announced its position regarding investments via SAFEs. It determined that, under particular circumstances, the investment is to be considered an advance on a share investment account.

A corporate inversion is a process of changing a company’s holding structure, largely with the intention of turning an existing company into a foreign company by positioning a foreign company as a parent company of the Israeli company and enabling the Israeli company to expand into new markets in the international arena.

Preparing reports on an accrual basis and adjusting them to a cash basis for tax purposes was an acceptable practice until the Israel Tax Authority (the “ITA”) determined otherwise. However, many companies still prepare two sets of reports, sometimes resulting in problems with the ITA.

The Israeli tax authorities are examining acquisition transactions, inter alia, to ensure they are not artificial transactions intended for offsetting losses. Transactions acquiring public shells are no exception in this regard.

A sale of intellectual property between related parties requires advance planning and preparation in order to avoid tax exposures in Israel.