International Law office
Big mistake: proposed amendment to Income Tax Ordinance misses its mark
In recent years the Israeli currency - the new Israel shekel - has gained considerable strength against the US dollar. Israeli exporters have been seriously damaged by the flow of 'hot money' to Israeli capital markets in order to exploit the differences in prevailing interest rates.
What makes a transaction artificial?
Section 86 of the Income Tax Ordinance grants the assessing officer the power to disregard a transaction that is likely to decrease the amount of tax payable by a taxpayer where such a transaction is, among other things, considered 'artificial'. The boundaries of this artificiality were considered in the Supreme Court decision inSignonon June 26 2011.
Whose expense is it anyway?
InHevrat Record CA Ltd(April 14 2011) three partners decided to liquidate their partnership. The liquidation agreement called for the division of the partnership into two distinct businesses, to be carried on by two companies whose shares were to be distributed between the partners.
When does a loan to a shareholder become income?
InMoskovitch v Assessing Officer of Haifa(August 4 2011), the taxpayer was a controlling shareholder of a public company.
Computing a capital gain
· The gain must be split into the inflationary amount and the real gain. The inflationary amount is computed by linking the cost of the asset to the consumer price index (or in some cases, the foreign currency used to purchase the asset) and deducting the nominal cost.
Pitfalls for service companies
Service companies are a common feature of the Israeli fiscal landscape. They serve two main purposes. First, they allow their ultimate owners (ie, shareholders) to draw dividends in lieu of salaries. Dividends are not subject to the substantial national insurance contributions. Usually, the shareholder receives a salary from the company, computed in such a manner as to gain the maximum benefit from the personal credits and progressive rates of the tax system.
New tax reform introduced following commission report
Summer 2011 saw widespread dissatisfaction with the government's social policy. Demonstrations throughout the country brought about the creation of a government-appointed commission in order to reset the state's social priorities.
Court rules on what constitutes an Israeli asset for purposes of zero VAT rate
The Value Added Tax (VAT) Law 1975 specifies a zero rate of tax for a number of transactions. Where such a rate applies, the taxpayer does not pay VAT on the transaction, but may offset the input tax incurred with respect to it against the transactional tax due on other transactions. Where the input tax exceeds the transactional tax, the difference is refunded to the taxpayer.
Artificial dividends: court rules on tax implications
InGolan v Assessing Officer Kfar Sava(1)the Tel-Aviv District Court held that a dividend paid exclusively on shares that were subsequently sold to the corporation constituted part of the consideration paid for the shares, and was therefore to be taxed as part of the capital gain achieved on the sale.
Court rules on taxation of insurance compensation
The taxpayer's enterprise caught fire and a building and machinery were destroyed as a result. The assessing officer sought to tax the compensation received for the building and machinery as a capital gain, and that received to cover leasing expenses as ordinary income