Recent years have seen a significant increase in publicly raised capital on the stock market by partnerships engaged in oil and gas exploration, which presents challenges due to existing tax legislation in Israel. In general, the process established in the law creates a distortion under which present partners will pay additional tax for past partners who benefited from the partnership's profits in a particular year.
The Tax Authority recently published a tax ruling addressing priority technological enterprise status with respect to an Israeli company that engages in the development and provision of cloud service platforms. The ruling provides that, subject to the Investment Law, income derived from the right to use a company's cloud platforms will be classified as income generated by a technological enterprise and, therefore, will be entitled to the Investment Law's reduced tax rates.
The Israel Tax Authority (ITA) recently published a tax circular to clarify cases in which a transfer pricing study filed by a taxpayer will be considered to fulfil legal requirements and thus shift the burden of proof in the assessment process framework to an ITA inspector, in contrast to the general rule that the burden of proof rests with the taxpayer.
The Value Added Tax (VAT) Law sets out that zero-rate VAT applies to the export of services to a foreign resident. However, recent judgments have interpreted such relief in a narrow manner and have significantly reduced the ability to charge zero-rate VAT on services rendered to foreign residents.
On 16 December 2019 the Haifa District Court determined that so long as shares awarded pursuant to Section 102 of the Israeli Income Tax Ordinance (New Version) are held by a trustee for the benefit of a grantee, they confer no shareholder rights on the grantee. The judgment also reinforced the practice of requiring Section 102 grantees to sign an irrevocable proxy.