Tax Authority puts squeeze on tax planning

Moshe Asher Photo: Eyal Yizhar

The Israel Tax Authority has published a list of tax planning schemes that must be disclosed under new legislation.

The Israel Tax Authority's campaign against aggressive tax planning has acquired formal status. Today, the Tax Authority published a list of tax planning schemes that do not conform with the Authority's stance and which taxpayers will have to declare in their annual tax returns. The publication of the list follows legislation passed last year whereby taxpayers are required to "shine a spotlight" for the Tax Authority on tax planning schemes they have adopted that the Authority disapproves of.

Tax Authority director Moshe Asher said, "Alongside the Tax Authority's battle against black capital, it is also constantly contending with illegitimate tax planning and extreme interpretations of tax law. Imposition of the duty to report tax planning that is in opposition to the Authority's stance, as the law describes it, will enable the Authority to cope better with the aggressive tax planning and the extreme interpretations that unfairly reduce the tax payments of those who resort to them, and will make for a more equal sharing of the tax burden."

The proposal to make taxpayers report tax moves that contradict the Tax Authority's position was raised in discussions of the Economic Arrangements Bill last year, and ignited a fierce dispute between the Authority and the professional bodies - the Israel Bar Association, the accountants, the tax representatives and taxation consultants.

The Tax Authority eventually proposed a watered down bill according to which taxpayers will have to report if they have accepted professional advice that runs counter to the Tax Authority's position in a number of cases: if tax consultancy results in a saving of over NIS 5 million in the tax year in question or of NIS 10 million over at most four years, or, in the case of indirect taxation (VAT, customs duty), a position that results in a tax saving of NIS 2 million in one year or NIS 5 million over four years. Reporting is also required in the case of an "off-the-shelf" tax opinion and in the case of a tax scheme on the basis of partnership between the tax adviser and the advisee.

The law has passed all legislative stages, and following that the Tax Authority has published its list of "positions" that require reporting. These were drawn up after discussions with the Israel Bar Association, the Institute of Certified Public Accountants in Israel, and the Tax Advisers Association in Israel.

In income tax, among the positions announced by the Tax Authority are that the calculation of the value of vehicle usage will be as per the regulations and no different calculation will be allowed; attribution of expenses in an approved enterprise will be both to revenue liable to full or reduced tax and to revenue exempt from tax under the Law for the Encouragement of Capital Investment; all the provisions of the Tax Ordinance and its regulations concerning deduction of tax at source will apply to a payment by an Israeli resident to an overseas resident through an overseas bank branch or bank account; and in cases of retroactive offsetting of a loss overseas in a year in which the taxpayer is entitled to a rebate, an amended return must be filed in Israel for the year in which a credit is required. Other positions are listed covering indirect taxation.

Published by Globes [online], Israel business news - www.globes-online.com - on December 26, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

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Moshe Asher Photo: Eyal Yizhar
Moshe Asher Photo: Eyal Yizhar
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