Insights & News /  Tax

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.

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.

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.

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. 

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."

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.

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.

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.

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. 

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."

Barnea was ranked by the World Tax, the International Tax Review's directory to the leading tax advisory firms around the world, as a leading tax firm in Israel.

The firm of Barnea Co, together with the Israel-Netherlands Chamber of Commerce, and the Netherlands Foreign Investment Agency, organize a breakfast workshop "Tax Changes 2014 relevant for Israeli companies investing in/through In the Netherlands" to be held morning of December 25, 2013, at the Offices of Barnea Co, 6 HaChoshlim street, 4th floor, Herzelia.  Invitations only.

Israel's Knesset on December 23 approved amendment 198, revising section 75B of the Income Tax Ordinance, 1961 (ITO) to further ensure the taxation of controlled foreign corporations. The amendment entered into force on January 1. Since 2006 Israel has taxed qualifying resident shareholders -- both corporate and individual -- on the undistributed profits of foreign companies that qualify as CFCs. Specifically, when an Israeli resident shareholder individually owns at least 10 percent of the means of control of a foreign company and collectively owns, together with other Israeli resident shareholders, at least 50 percent, and the majority of the foreign company's income is (by Israeli definition) considered passive in a specific tax year, the qualifying shareholders must each report their pro rata part in the undistributed profits of that foreign company as a deemed dividend. That regime also applies to foreign companies that are controlled at least 40 percent by close relatives.