Tax alert

In our newsletter from December 16, 2013 (No. 17), we elaborated on the expected legislative changes from January 1, 2014 on the subject of a CFC a FVC. The main changes are as follows: - The corporate tax rate in the foreign country that constitutes a criterion for the determination of a CFC has been reduced from 20% to 15%;

The State of Israel has signed more than 50 tax treaties with other countries, within which there is usually a clause dealing with exchanges of information, to the extent that the information is required for executing the provisions of the treaty or application of internal law dealing with taxes that are covered by the treaty.

The Income and Capital Tax Treaty between Israel and Malta (“the Treaty”) has been ratified in Israel (after its ratification in Malta) and took effect on January 1, 2014. The Treaty sets the withholding tax rates according to the passive type of income below, subject to the fulfillment of conditions and exclusions that have been prescribed in the relevant sections in the Treaty:

Pursuant to the Income Tax Ordinance in Israel, rental income is taxable at the regular tax rates (between 30% and 48% on the "net" income). Despite this, an individual who had income from renting a residential apartment may choose to pay tax at the rate of 10%, without the right to deduct expenses (including depreciation) and without the right of offsetting, credit or exemption, if the other conditions of the section are met. Many foreign residents choose this alternative, since by choosing it, they are not required to submit an annual report.

Recently, we receive questions related to the newly enacted legislative changes in the Trust's Taxation Chapter of the Income Tax Ordinance ("ITO") regarding the taxation and reporting duties of trusts in which there are Israeli beneficiaries- is there any advantage to perform distributions from the trust before the end of 2013?

We wish to bring to your attention some of the expected significant changes in the Israeli tax legislation, concerning two of the main international anti-abuse provisions – Controlled Foreign Companies (CFC) and Foreign Vocation Companies ("FVC"). The expected proposed changes are set forth below in summary format (as stated below, those are proposed changes only):

In the framework of the extensive legislative amendments in Real Estate taxation (which we discussed in depth in the previous bulletin), it was decided that, starting from 1 August 2013, the purchase tax rate applying to a “single residential apartment” would apply only to an individual who is an Israeli resident. Recently, the tax authority published a “Declaration of a Purchaser of a Single Residential Apartment” form (no. 7912), which must be attached by a purchaser who is requesting the application of the lower purchase tax for a “single residential apartment” of an Israeli resident.

We wish to bring to your attention some of the significant changes in the Israeli tax legislation, as part of recent legislative amendments which are related to the state budget for 2013-2014 (“the Budget Legislation"). The changes will enter into force as of January 1st, 2014 (unless otherwise stated). Within the Budget Legislation, the Income Tax Ordinance ("ITO") and...

We wish to put forth before you in summary a number of newsflashes that our office has published on the subject of trusts in the last quarter. As an introduction to the cases set forth below, it must be noted that the trusts chapter in the Israeli Income Tax Ordinance that took effect in 2006 grants a trust a legal status for ...

Recently, the Tax Authority has published a tax ruling and a circular on the subject of fiscal residency of an individual: a taxruling (consensual) that deals with setting of conditions for receiving a certificate of a resident of Israel for treaty purposes, and a circular that deals with the options of receiving prior approval of new...