Israeli Tax Alerts | Practical Interpretations | 2008-2020

20 termination thereof that was not at the initiative of the Appellant is what affected the decision of the court. (January 2015) Emphases for management and control tests According to Israeli tax laws, a company is considered a resident of Israel if it has been incorporated in Israel or if management and control of its businesses are performed in Israel. The Tax Authority has recently publicized clarifications on the matter of management and control of companies from Israel, including general background on rulings recently publicized on this issue, as well as emphases and guidelines for action required when examining the place of management and control of a company. The rulings discussed in the amendment are the Niago case (Civil Appeal 3102/12); Yanko Weiss (Civil Appeal 805/14) and the Shay Tzamarot case (Civil Appeal 32172-05-13). In principle, the amendment does not include any substantial innovations with regard to analysis of the term ‘management and control’; however, the concentration of facts and decisions lying at the foundation of the rulings, and formulation of guidelines for action constitute an effective tool in the hands of taxpayers and representatives who wish to examine the issue in the context of their businesses or customers. The main emphases including our comments, in a nutshell, are as follows: 1. In the present technological era, the existence of management and control may be carried out "by remote control"; thus, residency of directors and location of board of directors meetings is of no great importance. Nevertheless, it should be added that to the extent it becomes clear that the process of making substantial decisions (as opposed to the act of making the formal decision itself) is performed outside of Israel, among other things, as part of convening the board of directors, this may establish management and control outside of Israel. 2. The existence of foreign directors and managers does not in itself indicate management and control outside Israel, if this involves people who are not knowledgeable in company affairs, and do not wield the authority actually applied in making significant decisions for the company. Furthermore, the Tax Authority attributes importance to the salaries earned by executives, assuming that whoever is given the authority (and responsibility) to make decisions is entitled a worthy salary for it.