Israeli Tax Alerts | Practical Interpretations | 2008-2020

68 character (e.g. business income or capital gain) and be reported in the member's annual tax return. The profit will then be calculated according to Israeli tax law and domestic tax will be levied. Tax paid in the U.S.A will be credited against the Israeli tax, so situations of economic double taxation are avoided. Loss of the LLC, however, is not attributed to the member and may not off-set his other income or gains. The loss is retained in the LLC and may be off-set against its future income, subject to the general Israeli rules regarding off-setting losses; e.g. a loss generated from a business activity may be off-set against future business profits. This treatment of a pass-through entity is contingent upon the LLC being treated in the same manner for U.S tax purposes. Unless an election is made (according to the said circular), the LLC will be treated by the Israeli tax authorities as a corporate entity and distributions there from as dividends paid to its members. We may note that this classification has not yet been debated nor decided upon by an Israeli court. (April 2011)