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.
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.
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’.
The Income Tax Treaty (2016) between Canada and Israel has been entered into force on 21st December 2016 for avoiding double taxation and it generally applies from 1st January 2017 for withholding and other taxes. But, the provisions of article 23 (mutual agreement procedures) and article 24 (exchange of information) generally applies from 21st December 2016. This new treaty replaces the previous Canada – Israel Income and Capital Tax Treaty (1975) on these dates.
A new Tax Treaty between Austria and Israel has been signed on 28th November 2016. Once in force and effective, the new treaty will replace the existing Austria – Israel Income and Capital Tax Treaty (1970).