Israel: District Court makes a decision on Israeli transfer pricing rules

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A decision was made and governed by an Israeli District Court that when an Israeli company gained IP ownership and shortly thereafter its employees and other assets (with IP) to a related party, the transfer should be counted as a sale for whole business doing. Also, in that case, IP value was also well-defined and it was resulting from the share acquisition (from Israeli companies) price for tax purposes.

For the first time, the court ruling notices that this type of transaction occurs in acquisitions of Israeli companies where the employees and assets (including IP) are shifted as well as it creates a capital gain. The Court also give its explanation regarding transfer pricing principles, which notifies the way of describing the essence, the chance of assets being transferred and the way of selecting the price of those assets.

Armenia: DTA with Israel signed

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On 25 July 2017, the Minister of Foreign Affairs of Armenia and the Minister of Regional Cooperation of Israel have signed a Double Taxation Agreement (DTA) for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.

Both ministers also highly prioritised the expanding legal-contractual cooperation and the dialogue between the two countries. Meantime, they stressed the importance of a closer partnership with international organisations and a more active inter-parliamentary exchange.

Austria: DTA with Israel approved

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The Austrian National Council on 29 June 2017, approved the Double Taxation Agreement (DTA) with Israel for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income. Once in force and effective, the treaty will replace the existing DTA of 1970.

Israel: Status updates of automatic exchange of country-by-country (CbC) reports

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The Israel Tax Authority declared the signing of a multilateral agreement for the automatic exchange of country-by-country (CbC) reports and of common reporting standard (CRS) information. The Director of tax authority signed the Multilateral Agreement for Automatic Information Exchange (CRS) on Common Financial Reporting (CRS) and a multilateral treaty for the implementation of multi-national reporting by submitting an annual report. The CRS is an agreement to implement automatic information exchange regarding financial accounts of foreign residents. The agreement and its standards were developed by the OECD for the purpose of tax enforcement. The CbC report is part of the documentation and reporting requirements for transfer prices as developed by the OECD. The report includes information about the group and its operations. The previous year’s budget contains provisions for the implementation of CbC reporting obligations. However, the CbC provisions were drawn from the budget bill and were then continued by the Knesset as an independent bill.

Israel: BEPS updates

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The Ministry of Finance on 1st of May 2017, signed tax regulations for implementing the OECD’s nexus approach. This approach is mainly a BEPS requirement in case of intellectual property (IP) preferential tax regimes. The proposed regulations are waited for the approval from the Finance Committee of their Parliament. Once approved, this new IP regime will enter into effect from 1st of January 2017. The Finance Minister circulated the regulations in order to give the proper guidance regarding the new Israeli IP regime’s implementation. The maximum benefit available for IP income is a reduced 6% corporate tax rate under the new Israeli tax legislation. In line with the OECD BEPS Action 5 guidelines, tax incentives in case of intellectual property will be restricted on the extent of research and development (R&D) activities of taxpayers getting benefits.

Israel: Tax incentives on capital investment in hi-tech industry introduced

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An amendment to the Law for the Encouragement of Capital Investments has been published by Israel on 29th December 2016, which was part of the changes made in the framework of the 2017-2018 Law on Economic Arrangements. Corporate income tax (CIT) rate reduction from 16% to 12% in case of qualifying companies with turnover of less than NIS 10 billion. Reduction in CIT rate to 7.5% from 9% for eligible corporations located in a ‘priority zone’. A 4% reduced withholding tax rate applies on dividends derived from “preferred technological income” and distributed to a foreign resident corporate recipient. A discount CIT rate of 6% applies for ‘preferred companies’ with a ‘special preferred technological enterprise’ generating ‘preferred technological income’.

Israel: Transfer pricing amendments has been proposed

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The Parliament approved the bill regarding country-by-country (CbC) reporting on 1st February 2017. It must be published in the collection of laws for becoming law. This bill will become effective as from 1st March 2017. It was submitted to the parliament on 4th November 2016. Slovak Republic introduced Country-by-Country Reporting (CbCR) based on the recommendations of the OECD. All multinational corporations with combined annual revenues of at least EUR 750 million will be obliged to file a CbC report. The CbC report must be submitted by a resident company in Slovak Republic that is the parent company of a corporate group and shall be submitted in the jurisdiction where the group’s ultimate parent company is tax resident and shall be exchanged with the jurisdictions where the group operates. A parent company is a company that is not a subsidiary of any other company in Slovak Republic. The country by country reporting requirement applies where the consolidated group revenue in the preceding year is at least €750 million. The report must cover distinguishing between related and unrelated parties, group revenue, accounting results before corporate income tax (or similar taxes) and corporate tax (or similar taxes) paid or accrued, including withholding tax. The average number of employees in each entity must be reported. The CbC report must be submitted within twelve months after the tax year end.