Client updates / Tax

The Israeli Tax Authority (ITA) has announced this morning that the temporary Provision regarding the voluntary disclosure procedure which was supposed to expire today, has been extended until December 31^st, 2016.

The Israel Tax Authority published a tax ruling given by it recently that sheds light on the existing ambiguity when classifying proceeds from a sale of shares of a company

On 21 August 2014 a new tax treaty between Israel and Germany was signed. The new treaty, which is based mainly on the model tax treaty of the OECD, introduces a number of favorable amendments (for the taxpayer) and improvements. 

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

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.

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).

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.

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.

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).

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 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.

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.

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.