US Secretary of the Treasury Steven Mnuchin and Israel's Minister of Finance Moshe Kahlon are set to announce the appointment of a joint task force to review the tax treaty between Israel and the US designed to avoid double taxation, and to identify sections of the treaty that need to be updated.
Mnuchin, who arrived in Israel at the weekend, opens his official visit this morning. He will visit leading Israeli technology companies and attend a session of JEDG - the US-Israel Joint Economic Development Group. The focus of his visit will be talks on the US-Israel tax treaty, against the background of the tax reforms introduced by US President Donald Trump and concern in Israel about the consequences of the reforms for Israeli exporters to the US. Mnuchin heads a delegation that includes senior US Treasury officials, and meetings are planned with officials from the Ministry of Finance.
The US-Israel tax treaty goes back a long way. It was initially signed in 1974. Additional protocols were appended to it in 1980 and 1993. The consolidated version was signed in 1994, and came into force on January 1, 1995.
The Ministry of Finance points out that since that time many changes have taken place in the economic and legal environments in the two countries. Tax rates have been reduced substantially, and tax treaty models have also changed.
Israel, after the liberalization of its foreign currency regime and the growth of its private sector has changed from a developing country to a developed country, and from an importer of capital to an exporter of capital.
For these reasons, the current wording of the tax treaty no longer suits the economic needs of the two countries. After reviewing the treaty, the task force will, if it sees fit, make recommendations on opening negotiations between Israel and the US to update it.
Published by Globes, Israel business news - en.globes.co.il - on October 21, 2018
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