Client updates /  Income Tax

As a rule, foreign residents investing in Israel are exempt from Israeli capital gains tax, unless their activities are considered a business or are attributable to a permanent establishment in Israel. Investment funds that invest in Israel, however, are not necessarily eligible for this exemption, even where their limited partners are passive investors. This distinction may discourage foreign investment in Israel.

The Haifa District Court recently held, in a precedential decision, that an employee who received shares in a company held by a trustee in accordance with section 102 of the Income Tax Ordinance has no shareholder rights.

A precedential judgment was handed down on option plans for employees in respect of section 102 of the Income Tax Ordinance. The court ruled that when a tax assessor is notified of the allocation of options in accordance with section 102 and fails to respond within 90 days, the plan is approved and the assessor cannot later claim that this is not so, except in very exceptional cases.