The Israeli budget plan proposed for 2017-2018 introduces significant changes with respect to international taxation, and would be relevant for individuals, multinational corporations operating in Israel, and Israeli corporations operating abroad.
The budget plan (Hebrew) [PDF 1.95 MB] and the related tax measures are pending approval by the Knesset (Israel’s legislature). The following brief description provides a high-level summary of some of the proposed tax changes and expected consequences.
An amendment to section 1 of the Israeli Tax Ordinance (ITO) would introduce a rebuttable presumption that the management and control of businesses (i.e., a body of persons) incorporated outside of Israel would be viewed as being located in Israel if:
Furthermore, an amendment to section 131 of the ITO has been suggested, with the change creating and imposing a reporting obligation for a body of persons claiming such measures do not apply to it.
A proposal under consideration would repeal, as of 1 January 2017, the reporting relief for “new immigrants” and “veteran returning residents”, as defined in section 14(a) of the ITO. Furthermore, it has been suggested to repeal, also as of 1 January 2017, section 14(d) of the ITO that allows the Finance Minister to regulate relief regulations with respect to reporting obligations of “new immigrants” and “veteran returning residents.”
Another measure being considered concerns the reporting obligations with
respect to multinational transactions between related parties, pursuant to
Action 13 of the OECD’s Base Erosion and Profit Shifting (BEPS) plan. Read TaxNewsFlash-Transfer Pricing
Another measure would amend the definition of “passive income” for the
purpose of the provisions of a controlled foreign company (CFC) and would
introduce a rebuttable presumption providing that interest income, linkage
differences, royalties, and rental income would be considered to be
passive income—even if earned as business income.
For more information, contact a tax professional with the KPMG member firm in Israel:
Dina Pasca-Raz | +972 3 684-8935 | firstname.lastname@example.org
John Fisher | +972 3 684-8666 | email@example.com
Asaf Leshem | +972 3 684-8049 | firstname.lastname@example.org
Itay Falb | +972 3 684-8098 | email@example.com
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