Israeli Tax Alerts | Practical Interpretations | 2008-2020

129 Ordinance determines that "the provisions of this section shall apply despite that stated in any legislation”. Whereas elsewhere in the Ordinance it is determined that “since the Minister of Finance has notified in an order that an explicit agreement has been made with a certain country to give exemption from double taxes... The agreement on the matter of... income tax shall be valid despite that stated in any legislation”. We have thus noted two provisions of the law that supersede “that stated in any legislation” in coexistence, despite the fact that they may contradict each other. In such cases, it is commonly accepted to see later and/or specific legislation as overriding general or earlier legislation; in the above case, the new legislation is both later and specific with respect to the surtax. Nevertheless, the purpose of the section was not to undermine the principles of international taxation in Israel, according to which the provisions of the treaty supersede those of domestic law, including with respect to the limited tax rates or exemptions included in it. In addition, the treaty usually includes provisions on the taxes discussed in the treaty and, in general, the surtax is included as income tax sheltered under the wings of the treaty. Thus, for example, in the treaty with the United States, it is determined that it shall apply among other things to taxes imposed pursuant to the Israeli Income Tax Ordinance [section 1(1)(b) of the treaty]; the surtax is indeed imposed pursuant to Ordinance provisions. Thus, for a dividend distributed by an Israeli company to an American individual, even in the case of a substantial shareholder (who is usually subject to tax at the rate of 30% plus surtax), according to the treaty only 25% tax will be deducted, and shall be the final tax imposed on that individual. It is understood that to the extent that the treaty gives Israel unlimited first taxation rights, she may also impose a surtax on that income. The issue is even more complex when treaty country residents produce income from different sources, part of which Israel has limited taxation rights for, and full taxation rights for the rest. Can it be determined then that income for which the tax rate is limited will come at the last stage of the taxable income ladder and thus not be charged surtax? (October 2017) Business investments - insight from taxation decisions on the subject of permanent establishment for foreign investors Many entrepreneurs wish to direct their available capital to investment in Israeli companies in a variety of areas, in particular - the Israeli high-tech sector, known to be one of the central growth engines of the economy. Government grants and the enactment of the "Angels Law"