Israeli Tax Alerts | Practical Interpretations | 2008-2020

237 being resident in Israel, if the control and the management of its business are operated from Israel. Thus for example, an officer who is a member of the management of an international company, who is "stuck" in Israel as a result of the Corona crisis and who continues to manage the company as usual, could expose that foreign company to taxation in (on all of its income). Moreover, the determination of Israeli residence for such a company, even if for a short period of time, may cause the imposition of "exit tax" on the Company, at the time at which the Company ceases to be deemed to be resident in Israel, after the Corona period, and clearly, this is not what the legislator intended. Our position is that the control and management mechanism in relation to the Company should be examined from a long-term perspective, and no determination regarding the company's place of residence for tax purposes should not be concluded from a temporary stay in Israel, all the more so as a result of circumstances that are not under the control of the company or its manager. 2. Permanent establishment: A similar issue arrives in relation to the existence of a permanent establishment in Israel, which may arise because of a senior officer's stay in Israel, which has been forced by the circumstances and who executes decisions in the Company's name (such as in the case of the manager in the example that appears above). In this connection, it can be claimed that because of the temporary nature that the economic presence in Israel in the circumstances that are described above has, it cannot be determined that a permanent establishment arises in Israel for a foreign company. This also fits with the aspect of the determinations that are required for the existence of a permanent establishment in the tax treaties that the State of Israel has signed upon, and if the economic presence in Israel is temporary, all the more so in the circumstances that have been forced upon the project, the requirement in the said determinations is not met. (April 2020)