Israeli tax authorities requirements
Reporting and taxation requirements for a “Permanent Establishment” (or “Fixed Presence”) in Israel. A company which has extensive activity in Israel or that can be regarded as having a “Permanent Establishment” in Israel, has a full reporting requirement in Israel to all tax authorities. In this situation, the company has two options:
- Open a “fiscal representative office” (referred to as a branch)
- Register as an Israeli company
A company is required to report, as stated previously, usually as follows:
- Value added tax – monthly or bi-monthly reporting, in accordance with the extent of the transactions and the decision of the tax authorities. VAT is at a rate of 18% of revenue turnover (as of July 2015).
- Taxes on dividends – within the framework of income tax. Dividends of an Israeli company distributed to shareholders outside of Israel, will be charged with dividend tax at a rate of 25% or 30% depending on the percentage of their control or shareholding and on agreements to avoid double taxation between two countries.
- Cooperate Income tax – Reporting and payment of income tax, at a 26.5% (as of July 2015) of the company’s profit in Israel. Annual reporting at the end of the tax year (calendar year), reporting generally taking place a few months after the end of the tax year. In this report, the company declares the amount of the company’s tax debt to the tax authorities in Israel.
“Hearings” and auditing before the tax authorities take place every few years, usually at 3 to 7 year intervals, during which the tax authorities audit the annual returns filed by the company. Only during the course of the hearing is the final tax assessment determined for the company.
When a company or its representation wishes to terminate activity in Israel prior to having undergone a hearing, the tax authorities will generally bring forward the hearing to the nearest possible date, in order to verify the final tax liability. It is also possible that the tax authorities will initiate a hearing with the company when the nature of the business activity is unclear to them, or where the level of tax or rebates required is not high.