Israel Taxation and Tax Law

Tax Law and Taxation

The firm is actively involved in tax planning and structuring of optimal ways of doing business in and out of Israel. Israeli tax law is complex, but suitable tax planning may reveal certain loopholes from which an investor may benefit if used properly. This requires the advice of an expert. The firm is involved in all aspects of tax advice in connection with transactions conducted by its clients, including the preferred structure for tax purposes, the tax consequences of gain derived from the transaction, exemption accorded to foreign investors and other relevant tax issues associated with the clients business. In many cases, the firm also combines its Amsterdam office in providing its clients with a structure that meets the needs of the clients when operating outside of Israel, such as formation of a Dutch company (BV or NV) or another offshore entity.   


Corporate Taxation

Israeli tax law has many traps that require the management of a company, particularly publicly traded companies, to carefully review the tax consequences of almost every transaction and/or action of the company over its life span. For example, distribution of a dividend may be exempt from taxation if the recipient is an Israeli resident company and taxable if the recipient is an individual or a non-Israeli resident, whether an individual or a corporation. Accordingly, before taking any action or accepting any major resolutions, it is advisable to consult with a tax expert with regard to the tax aspects of the proposed action.
Our law firm is actively involved in all such resolutions of our clients, advising them on the various tax implications and consulting on the preferred ways of achieving their business goals tax wise.
Current corporate tax rate in Israel is 25% (2010).

M&A Taxation

The tax consequences of an acquisition or merger transaction may be significantly affected by its structure. In addition, Israeli tax law provides for certain tax free reorganizations if certain conditions are met. A clear  example for the contrasting tax consequences which may result from the way an acquisition transaction is structured may be found in case of a purchase of a company. The purchasing of the assets of a company may result in substantially different tax consequences compared to the purchase of the company's shares even though both ways end up in the same economic result. Therefore, the advanced review and planning of the proper structure of doing a certain deal is crucial to its success.

Our law firm is advising our clients on the various possible structures, the advantages and disadvantages of each structure in light of the particular circumstances of the contemplated transaction and the tax attributes of the client and recommend on the most beneficial way of doing the deal. We have a vast experience in designing, structuring and doing M&A transactions and may provide our clients with a thorough review of the Israeli tax aspects.    

Taxation of Non-Israeli Investors

Non Israeli resident investors may be fully exempt from capital gains tax in Israel commencing from 2009. However, the structure of their investment may substantially affect their tax consequences in their country of residence. In addition, the proper structure of financing of the investment may be important and may have substantial impact on the tax aspects depending on whether the investor's country of residence is a party to a tax treaty with Israel or not.

Our law firm advises our client on the proper structure of their investment in Israel, including the form of the investment, whether partnership (general of limited), joint venture or a limited company; We further assist our client in structuring the financing of the investment as equity or loan and provide in general the guidelines of how to do the investment with a minimal exposure to Israeli taxation.

Oil & Gas L.P. Taxation

Under Israeli tax law a partnership is a pass through entity. The taxation is imposed on the partners and not on the partnership whose profits, loses and expenditures are allocated to the partners. There are special tax regulations that provide certain tax benefits to partnerships involved in petroleum oil and gas exploration in order to provide an incentive to investors in such partnerships.

Our firm has represented in the tax matters most of the oil and gas partnerships traded on the Tel Aviv Stock Exchange. We provide these partnerships with on going tax advice on their taxation, including legal opinion on the tax aspects when the partnership raises funds on the stock exchange and a pre ruling from the Israeli Taxation Authority as to the tax consequences of the partnership which is a condition for going public and later when the partnership wishes to raise additional funds.

Pre-Rulings and Tax Litigation

In recent years the pre ruling procedure became popular in Israel. Many non Israeli residents investing in Israel request that we would obtain a pre ruling as to their tax consequences and/or certain more specific matter relating to their investment (including investments in start-up companies and venture capital funds). In addition, when no settlement is reached with the tax inspector we represent client who wish to appeal the audit issued to them by the tax assessor.

Dr. Zeev Holender holds S.J.D from Harvard Law School, done the field of taxation of M&A's, and has served as a lecturer in taxation and corporate taxation at the Faculty of Law of Tel Aviv University as well as at other universities and colleges in Israel