Weekly Newsletters

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):

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.

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...