Israeli Tax Alerts | Practical Interpretations | 2008-2020

12 from the Israeli Company and/or the appellants. Such mechanism may constitute an artificial platform... " As was following discussed, the Foreign Company has not provided the professional tools required for the contemplated marketing activities. Moreover, the Foreign Company's business was partially conducted in Hebrew, which is not spoken by its managers nor by its employees, and actually were lying on business communication and documentation transferred between the Israeli Company and the independent agent. Independent agent's activity - in this case, there was no difference, whatsoever, between the agent's activities prior to the establishment of the Foreign Company and afterwards. He continued to work with the Israeli Company, without any involvement of the Foreign Company's managers and employees, including the determination of fees received by each of the factors involved in the said business. Apparently, this fact reinforced the Court's statement that the Foreign Company's establishment was of an artificial nature. Conduct of managers and employees - the evidences presented to the court showed that the Foreign Company's directors were not engaged in daily activities for and on behalf of the company and had no real knowledge about its business activity. During his investigation, one of the directors couldn't mention not even one of the manufacturers' names with whom the company was associated. Later, the ruling stated that: " even if one of the directors was engaged in daily administrative activity, after all, it doesn't suffice for demonstrating a real management support of the company. " Shareholders' behavior – ITA Circular n o 4/02, dealing with guidelines for management and control's determination, provides that one should examine who is the factor managing and controlling the business's activity: in the case that strategic decisions are not determined at the company board level, the shareholders are presumed to be the decision makers. In this case, one of the shareholders (an Israeli resident), confirmed that him and the other shareholders decided whether to engage with a customer suggested by the independent agency - a fact that contradicts the appellants claim. The facts further indicate that decisions regarding policy management and contractual agreements were made by them rather than by the Foreign Company's managers (we would mention merely that management and control is conducted where the directors carry out their powers, regardless their residency). Protocols and documents - the ruling emphasizes the importance of what is written in various documents. In this case, the facts showed that no significant decisions were made by the Foreign Company or by its managers. Documented decisions were short and laconic, without any relevant discussions or comments regarding the issues that were allegedly on the agenda.