Weekly Newsletters
Further to our special tax alert dated March 11, 2014 on the subject of “Israel Taxation of Trusts – Transitional Arrangements Published by ITA”, we wish to bring to your attention that the Israeli Tax Authority (hereinafter: "ITA") has decided to grant an extension till June 30th, 2015 (instead of through to December 31st, 2014) for resolving a trust that is classified as an “Israeli Resident beneficiary trust”.
In October 2014, the District Court in Haifa gave a ruling for the case involving Mrs. Yael Tzur (hereinafter: “the Appellant”), an employee of ZIM Integrated Shipping Services Ltd (“Zim”), which dealt with the question of severance of Israeli residency for tax purposes and the date thereof.
Recently, the ITA published to the general public that it is conducting investigation and taking measures against Israelis, who did not report their ownership of foreign bank accounts and the income thereof. Following to information obtained and gathered by the ITA regarding these bank accounts owners, the ITA started to execute extreme measures against them, by arresting them and/or summoning them to inquiries
An Israeli company that operates directly abroad, and not through a local company, may be subject to corporate tax (or equivalent taxes) for its income in a foreign country, subject to the provisions of the local tax law in that country and in accordance with the provisions of the relevant tax treaty, which usually provides for the first right of taxation when there is a permanent establishment in that foreign country.
Under the new provisions in the ITO regarding trusts, a trust which includes a settlor who is a foreign resident and a beneficiary who is a foreign resident, is classified as a Foreign Residents Trust that is not required to report in Israel (to the extent that there are no taxable income in Israel).
An Israeli individual may invest in assets and hold them overseas directly or alternatively through an Israeli company. In Israel, an individual may apply to classify the Israeli company as a family company. The tax regime relating to such a company is that its taxable incomes will be allocated to one shareholder only (usually the shareholder holding the majority of the shares in the family company).
On September 7, 2014, the Israel Tax Authority ("ITA") published a new "Voluntary Disclosure Procedure" (hereinafter: the "Regular Procedure") which is intended to replace the current voluntary disclosure procedure that was published in 2005.
The Trusts' chapter in the Income Tax Ordinance ("ITO") requires the reporting of trusts and the opening of files with the Tax Assessor's office in the appropriate cases. There is no doubt that these obligations apply to a trust in which the settlor is an Israeli resident (in which case, the trust will generally be deemed to be an "Israeli Resident Trust").
Below we shall review, in brief, the provisions of the tax treaty with Panama, which will enter into force from the 2015 tax year, and the new tax treaty which has been signed (but not yet ratified) with Germany.
Recently, more than 100,000 citizens of Israel, most of whom do not submit annually tax returns to the ITA, have received a demand to submit certain details to the "Identification" Department of the ITA, for the purpose of the conducting of a preliminary examination.
Recently, more than 100,000 citizens of Israel, most of whom do not submit annually tax returns to the ITA, have received a demand to submit certain details to the "Identification" Department of the ITA, for the purpose of the conducting of a preliminary examination.