On May 10, 2016, an Income Tax Order was published in the Official Israeli Gazette effectuating the new tax treaty between Israel and Germany executed in 2014 and entering into effect as of January 1, 2017.
The new tax treaty which replaces the previous one signed between Israel and Germany in the 1960s dramatically reduces tax withholding on passive income and includes provisions regarding exchange of information between the tax authorities of Israel and Germany, overriding the domestic statutes of each regarding bank secrecy.
I had the privilege to manage the Israeli tax treaty team negotiating this new treaty with the German Tax Authorities in both rounds of discussions (held in Berlin and Jerusalem)
Attached is a client update reviewing the key provisions of the new treaty.
Further to our email dated February 18, 2016, we are pleased to update that the Joint Investment Trust Regulations (Foreign Fund Unit Offerings) - 2016 (the "Regulations") were finally published. The published version of the Regulations does not contain any substantial amendments compared to the version that was used for the preparation of the alert (attached herein again for your convenience). The Regulations will enter into force on November 5, 2016.
We note that the Israeli ETF Association of the Chamber of Commerce and the Association of Mutual fund managers, have petitioned to the Israeli Supreme Court against the entering into force of the Regulations, claiming that the Regulations provide foreign funds with built in advantages over local funds thus creating unfair competition. A hearing with respect to the petition is yet to take place.
Adv. Shiri Shaham and Adv. Michael Keren would be more than happy to respond to any questions or related inquiries.
While the R&D Law has undergone many amendments, none were as drastic as the recent one. Not only will a new National Authority for Technological Innovation be established for purposes of granting benefits to Israeli companies (instead of the OCS), this new Authority will have extensive discretion regarding the establishing of different tracks with different rules for the purposes of granting benefits. Large sections of the R&D Law have been deleted or amended, with crucial matters such as regarding transfer or licensing of know-how abroad to be left for determination by the Authority. As such, there will likely be a period of great uncertainty starting from January. The amendment will materially impact Israeli companies, as well as foreign companies looking to invest in or acquire Israeli companies or to license technology from Israeli companies, as described in the attached.
Published in the "Taxes" Magazine, August 2015.
Advs. Shira Lahat and Ofir Levy summarize the latest ruling of the district court in a matter where a company wanted its payments to a services company (through which it contracted with the CEO) to be classified for tax purposes as management services expenses. The Court ruled that the payment was essentially income from employment of the CEO, who provided himself the services, thus the company had to deduct tax at source from those payments, as well as to pay Employers' Tax (MAS MAASIKIM) and Payroll Tax.