Israeli Tax Alerts | Practical Interpretations | 2008-2020

141  It is a foreign resident in accordance with the definition in the Israeli Tax Ordinance, i.e., the absence of "management and control" in Israel;  It does not have a permanent presence in Israel (without a clear definition of what a permanent presence means);  There is no holding in or indirectly), by Israeli residents at a rate of 25% or more . In effect the Company is required to declare that the section in the Ordinance on the conditions for the granting of reliefs to a foreign resident applies to the case in hand, however, for this purpose it needs to clarify who the ultimate shareholders are and this may not be a simple matter in certain cases.  The exempt income is reported in the foreign corporation's country of residence! In effect, the Tax Authority in Israel is implementing the directives issued by the Bank of Israel to banking institutions in Israel, which are required, in accordance with those directives, to clarify that a foreign resident, who holds an account in that is maintained in that bank, is in compliance with the tax laws in its country of residence. We would mention in this connection that there is no tax implication in Israel for the absence of reporting abroad (and sometimes no reporting at all is required abroad in accordance with the tax laws in that country), in other words, the foreign company will still be entitled to an exemption under the provisions of the Ordinance! And the question needs to be asked – why is such a declaration required? Is it for the purpose of an initiated transfer of the information to the other country? For this is not required in light of the existence of a mechanism for the transfer of information automatically regarding bank accounts between most countries (CRS). The content of the declarations and the fact that this is a form that is recorded in the Hebrew language alone - in contrast to other forms, which are intended for foreign residents and which are (also) written in English - may provide a hint that the Tax Authority is trying to identify foreign companies that are held by Israelis indirectly for considerations relating to the avoidance of taxation. If this is indeed the intention, it will be possible to instruct the banking institution in Israel in which the foreign company's investment account is maintained to sign it on such a declaration (to the best of our knowledge, in any event foreign residents are required to sign on certain similar declarations to the bank), and to report to the Tax Authority on those cases that have been defined as being reportable , instead of placing the procedural burden on all foreign all foreign investors, and it is possible that some of those investors will simply choose not to invest in Israel in order not to get into the net of reporting to the Israeli Tax bank), and to report to the Tax Authority on those cases that have been defined as being