• Supreme Court of Israel Ruling Changes | July 2019

    Supreme Court of Israel Ruling Changes Classification of Dividend Distribution as part of the Value of a Shares Transaction On February 28, 2019, the Israeli Supreme Court ruled in an appeal on the Central District Court’s decision relating to a share transfer transaction. The court ruled that tax planning is legitimate only when it has a  commercial rationale and not just when it is designed to reduce the tax burden. In the case at hand, Sochnei Delek Veshmanim Ltd. (the “Buyer”) acquired Tahanat HaArba Ltd.  (the “Company”), whose main asset consisted of real estate on which a gas station was … Continue reading "Shir Antonovsky"
  • The IRS is watching you - Risk of Permanent Establishment

    Israeli High Tech Companies Doing Business in the US The IRS is watching you –Risk of Permanent Establishment A few days ago, the IRS released a practice unit to spot foreign companies with activities in the US, which are working through agents and/or a US subsidiary, named: “Creation of a Permanent Establishment (PE) through the Activities of a Dependent Agent in the United States.” (“IRS Guidance“). The IRS Guidance provides the IRS’ audit team a guide with respect to the creation of a permanent establishment (“PE“) for foreign companies in the US and provides a perspective of the IRS auditors … Continue reading "Shir Antonovsky"
  • Tax Update

    New Tax Circular 18/2018 Regarding Equity-Based Awards On December 5, 2018, the Israeli Tax Authority (the “ITA”) published the Income Tax Circular number: 18/2018, on the topic of “Performance Equity-Based Awards” (the “Circular”). The Circular discusses conditions according to which allocation of equity-based awards (“Awards”) to employees whose vesting is dependent on certain mile-stones, will be considered in compliance with the provisions of Section 102 of the Israeli Tax Ordinance [New Version], 1961 (“Section 102” and the “ITO”, respectively). Background Companies often chose to grant their employees with Awards (i.e. options, restricted stock units, restricted stock etc.), in order to … Continue reading "Shir Antonovsky"
  • Tax Update

     New Tax Circular 15/2018 Regarding Change in Business Structure in Multinationals On November 1, 2018, the Israel Tax Authority (the “ITA”) published the Income Tax Circular number: 15/2018, on the topic of: “Change in Business Structure in Multi-National Groups” (the “Circular”). The Circular discusses modifications to a business structure and/or activity of Israeli companies that are a part of multi-national groups. In the framework of the Circular, the ITA referred to certain identifying characteristics of a “silent business structure modification”, which entails  the transfer or even liquidation of functions, assets, or risks (collectively “FAR”) and the potential profit latent within … Continue reading "Shir Antonovsky"
  • Tax Update

    Israeli Hi-Tech Founders Debating: “To be or not to be an Israeli Company” Top 10 International Tax Issues Many entrepreneurs need to make a decision where to incorporate their company. Should the company be incorporated as an Israeli company or as a US corporation? The decision where to establish their startup can influence the future growth of the company and may be irreversible. This debate has been repeated recurrently over the years between practitioners, and no specific or final formula exists. The decision is mainly based on the international tax considerations resulting from the corporate structure. William Shakespeare’s question, “To … Continue reading "Shir Antonovsky"
  • Tax Update | October 2018

    Mitigating Trump Tax Reform GILTI: Tax Related Investments in Israeli High-Tech Companies Inversion from Israeli Company into US Corporation The High-Tech industry in Israel attracts many US investors to invest in high-tech companies. Such investments are made directly or indirectly through venture capital funds and/or private equity funds incorporated mostly as US and/or Cayman partnerships, mainly as a vehicle to invest in an Israeli startup in areas ranging from software to biotechnology, cybersecurity and other major technology segments. Israel’s startup ecosystem is ranked among the top five in the world. As part of the Trump Tax Reform, the new Section … Continue reading "Shir Antonovsky"
  • Tax Update | September 2018

    The Israeli Tax Authority Issued New Circulars on Transfer Pricing Transfer pricing tax matters relate to the examination of pricing transactions between parties that maintain special relations, as stated in Section 85A (herein: “Related Parties”) to the Income Tax Ordinance (New Version), 1961. When a transaction is made between unrelated parties, the difference in interests results in the price and the conditions of the transaction reflecting the market conditions. A fundamental principle in the field of transfer pricing is the “Arm’s Length Principle” for determining market conditions between Related Parties. The terms of the “Arm’s Length Principle” between Related Parties … Continue reading "Shir Antonovsky"