Tax Authority collects first trapped profits taxes

In the past two weeks, six companies have opted to unfreeze part of their trapped profits and pay dividends taxes totaling NIS 200 million.

Sources inform ''Globes'' that six companies have opted to unfreeze part of their trapped profits and pay the dividends tax, amounting to NIS 200 million. The tax collection comes just two weeks after the necessary forms were published, and a month after the trapped profits law came into effect.

The Israel Tax Authority told "Globes" that some of the companies have not yet unfrozen all their trapped profits on which the tax break applies, and that it expects the companies to unfreeze more profits in line with their business plans, as they prefer to distribute dividends in 2013.

Tax Authority director general Doron Arbely said, "In view of the high collection rate from the measure, the directive should generate more than the NIS 3 billion in revenues promised in the legislative proposal."

The Tax Authority added that, in addition to the directive, it was about to issue implementation orders, which will state that companies which used tax exempt profits under the tax exempt program rather than in accordance with the intent of the law "will see these uses as the distribution of a dividend, which will be liable to the companies tax, from which they were exempt, as well as deduction of the 15% withholding tax on the dividend." It added, "Where appropriate, the Tax Authority will assess the companies."

In the past few weeks, the media has reported alleged flaws in the new law, which will result in companies continuing to evade taxes on trapped profits, and that there was no point in expecting revenues to help plug the budget deficit.

Published by Globes [online], Israel business news - - on December 23, 2012

© Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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