Client Alert: Israel Transfer Pricing Legislation Update – Significant Change in Documentation and Reporting Requirements
The Israeli transfer pricing regulations have been in place since legislated in November 2006. The initial legislation generally followed the OECD Guidelines and required that cross-border, related party transactions be undertaken according to the arm’s length principle. Recently, Israel’s transfer pricing regulations were significantly amended in light of the OECD / G20’s BEPS initiative, […]
Client Alert: Amendments to Israeli Transfer Pricing Landscape
Amendments to transfer pricing documentation requirements in Israel have been under the status of ‘proposed’ for almost two years. Just before the Israeli government (the Knesset) dissolved pending a new round of elections, however, Amendment #261 to the Israeli Tax Ordinance (5721-1961) was approved in the second and third reading on June 30, 2022. Israel’s […]
Israeli Courts Again Side with Taxpayer in Transfer Pricing Business Restructuring Ruling
In a recent decision by the Israeli District Court in Tel Aviv, the court rejected the Israeli Tax Authorities’ (“ITA”) argument that a post-acquisition amendment to the appellant business model necessary implies a sale of business. In light of the common scenario of Israeli technology companies undergoing acquisitions by Multi-national Enterprises (“MNE”), the ITA has been […]
Client Tax Alert: OECD Releases First Update Since 2017 to Transfer Pricing Guidelines
Overview At the end of January 2022, the Organization for Economic Cooperation and Development (“OECD”) issued an updated version of its Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (the “OECD Guidelines”), representing its first update since 2017. The OECD Guidelines provides guidance on the application of the “arm’s length principle,” which is used […]
Israel issues tax circular to address Intercompany Recharges for Capital Instruments
The Israeli tax authorities recently issued its first tax circular of the year, Income Tax Circular 1/2021, “Payment to a Parent Company for the granting of Capital Instruments to Employees of Subsidiary (Recharge Agreement) for Intercompany Transactions” (Circular 1/2021). In 2018, the Israeli Supreme Court ruled that stock-based compensation must be added to cost […]
Israel issues updated draft proposal to amend transfer pricing documentation requirements
As an update to a proposed 2017 bill (Income Tax Ordinance No. 238 5777-2017), which was approved in the first reading in the Knesset (Israeli Parliament), the Israeli government amends its proposal to update its transfer pricing legislation to largely align with BEPS requirements adopted by the OECD Guidelines. The current transfer pricing legislation […]
Revisiting Business Restructuring in light of Israeli court decisions and circulars An edited version of this article is found in the International Transfer Pricing Journal, 2020
In April 2019, the authors of this article published in the International Transfer Pricing Journal an article that addressed, inter alia, OECD and Israeli principles of Business Restructuring, focusing on the various resulting models, such as outright sale and licensing structures. Since then, however, an Israeli tax court have reached a legal decision that change […]
Israeli Tax Authorities weigh charging immediate (partial) payment for disputes reaching tax court
The Israeli tax authorities are examining the possibility of changing the law with regard to tax collection in the event of an appeal by a taxpayer to the district court in relation to tax controversy, including disputes concerning transfer pricing issues. Under the current legal structure, a tax payment in the case of a […]
Israeli Tax Authorities Overruled in Israeli Court: Business Restructuring Does Not Trigger Tax Event
In a landmark ruling in the Lod District Court last week, the courts found in favor of the taxpayer while rejecting the Israeli Tax Authorities’ (“ITA”) position on the classification of a business restructuring from a tax and transfer pricing perspective. In the current case, Broadcom Semiconductor Ltd. vs. Kfar Saba Assessing Officer (the […]
Israeli tax authorities issue updated transfer pricing declaration Form 1385
The Israeli tax authorities recently issued an updated Form 1385, which is a declaration by management of Israeli entities regarding their intercompany transactions with related parties, in accordance with Section 85A of the Income Tax Ordinance (Determining Market Conditions), 5768. The updated form, which is required to be completed and submitted with tax reports […]