apa & map country guide 2019 – israel

APA & MAP Country Guide 2019 – Israel

CONNECTING THE DOTS OF INTERNATIONAL TAX CONTROVERSY

IsraelAPA Program

KEY FEATURES

Competent authority Transfer Pricing Department (TPD) of the Israeli

Tax Authority

Relevant provisions Sections 85A (d) and 158 of the Income Tax Ordinance

Types of APAs available Unilateral, bilateral, and multilateral APAs are available.

Acceptance criteria Applications may be made by any Taxpayer seeking an

APA to cover international transactions.

Key timing requests,

deadlines

The TPD has a 120-day timeframe within which it must

approve or reject an APA application; however, a 60-

day extension may be granted where notice is given

to the Taxpayer. The clock begins to run only after all

documents requested have been provided.

APA term limits There is no specific guidance for APA term limits.

In practice, the APA term will range between three to

four years.

Filing fee There is no filing fee.

Rollback availability No specific guidance.

Collateral issues No specific guidance.

PRE-FILING REQUIREMENTS

Overview No specific guidance.

Anonymous pre-filing

availability

Anonymous pre-filing is available.

APA & MAP COUNTRY GUIDE 2019

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APPLICATION REQUIREMENTS

Content of application While there is no specific guidance on the content of

an APA application, an initial APA request should be

sent to the TPD and include:

• the essential facts;

• transfer pricing documentation;

• relevant documents, approvals, opinions,

declarations, estimates and agreements;

• a description of the intercompany transaction; and

• the Taxpayer’s proposed consideration for the

transaction, including the profit level margin.

The TPD will then respond to the Taxpayer with a

request for the following data:

• information regarding comparable transactions;

• the chosen TP method;

• comparability factors and details regarding any

adjustments made to the comparability factors;

• the reasons for choosing the selected TP method;

• the results of the comparables;

• the relevant range of values or the interquartile

range and any conclusions drawn from the

comparison;

• financial reports of both parties for the previous

three years; and

• any document or other detail that deems necessary

for the ITA decision.

The TPD will then negotiate with the Taxpayer and may

request more documents, meetings and site visits.

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Language There is no specific guidance on the language in which

documentation must be submitted. In practice, the

application is expected to be submitted in Hebrew

while the documentation may be submitted in English.

SME provisions No specific guidance.

OTHER PROCEDURAL CONSIDERATIONS

General The Tax authority has a 120-day timeframe within which

it must approve or reject an APA application; however,

a 60-day extension may be granted where notice is

given to the Taxpayer. The clock begins to run only after

all documents requested have been provided. If the

TPD do not issue their decision within the time limits

provided, approval of the APA will be considered to have

been given and the transaction subject of the APA will

be deemed to be at arm’s length.

Monitoring & compliance Taxpayers should indicate in their annual tax return

(Form 1385) whether it engages in an international

transaction that is covered under an APA.

Renewal procedure There is no specific guidance for a renewal procedure.

In practice, the ITA supports APA renewals;

however, the procedure is similar to the initial APA

as stated above.


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Map Program

KEY FEATURES

Competent authority International Tax Department of the Israeli Tax

Authority (Tax authority)

Relevant provisions MAP provisions have not been incorporated into

domestic Israeli law.

Acceptance criteria Taxpayers may request a MAP if taxation has or is likely

to occur that is not in accordance with the provisions

of a DTT to which Israel is signatory.

Key timing requests,

deadlines

Most of Israel’s DTTs permit Taxpayers to present a

case to the Israeli Tax authority within three years from

the first notification to the Taxpayer of the actions

giving rise to taxation not in accordance with the DTT.

However, time limits may vary, and the relevant DTT

should be consulted for the applicable time limit.

ISRAEL


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APPLICATION REQUIREMENTS

Content of application Taxpayers must submit a MAP request that includes

the following:

• a description of the relationship (subsidiary,

ownership, etc.) between the Taxpayer and the

relevant entity;

• names and addresses of the entities;

• the applicable DTT and the relevant provisions;

• a description of the transaction with regard to which

the assistance is requested, as well as proof of the

harm (double taxation) that has occurred or might

occur in the future;

• an explanation of the requested relief;

• amounts related to the requests (in new Israeli

shekels and the relevant currency);

• the assessment of the local tax office, if one is available;

• a statement regarding whether the statute

of limitations has expired for objecting to the

assessment in the other country;

• whether any other taxing authorities are involved

(e.g. customs);

• any legal procedures that are completed or

underway in the relevant foreign country which are

related to the transaction;

• a declaration by the Taxpayer that it relinquishes its

right to confidentiality;

• a declaration addressed to the relevant foreign tax

authority which permits the Tax authority to reveal

information regarding the Taxpayer; and

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(cont.) • an acknowledgement of the Taxpayer’s obligation

to update the Tax authority in the event of changes

or developments.

Language No specific guidance.

OTHER PROCEDURAL CONSIDERATIONS

Interaction with domestic

proceedings

Domestic courts have signaled that the MAP

negotiation should occur before the commencement

of domestic legal proceedings.

Arbitration No specific guidance.

STATISTICS

APA Statistics on APAs are not publicly available.

MAP Israel had a total of nine active MAP applications as of

December 31, 2017. The average time needed to close

MAP cases is 53 months for transfer pricing cases,

and 85 months for other cases.

ISRAEL


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Double Taxation Treaty NetworkThe following treaties include MAP provisions which are the basis for bilateral and

multilateral APA negotiations:

Austria

Azerbaijan(IV)

Belarus

Belgium

Brazil

Bulgaria

Canada(IV)

China

Croatia

Czech Republic

Denmark(I)

El Salvador

Ethiopia

Finland

France

Germany(IV)

Georgia

Greece

Hungary

India

Ireland(I)

Italy

Jamaica

Japan

Korea (Republic of)

Mexico

Netherlands

Norway

Philippines

Poland

Portugal

Romania

Russia

Singapore

Slovak Republic

South Africa

Spain

Sweden

Switzerland

Thailand

Turkey

Ukraine

United Kingdom

United States

Uzbekistan

NOTESI denotes treaties with MAP arbitration provisions.

II denotes treaties with the USSR that remain applicable until a separate tax treaty is concluded.

III denotes treaties between the countries’ representative office in Taipei and the Taipei Economic and

Cultural Office in the relevant country.

IV denotes treaties that became effective within the last five years.

V denotes treaties that are awaiting ratification.

VI denotes MAP provisions identical to para 3, art 25 of the OECD Model Convention with respect to Taxes

on Income and on Capital.

VII arbitration is to be conducted under the statutes of the ECJ.

VIII arbitration is to be conducted under the statutes of the ICJ.

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DLA Piper is a global law firm operating through various separate and distinct legal entities. Further details of these entities can be found at www.dlapiper.com. This publication is intended as a general overview and discussion of the subjects dealt with, and does not create a lawyer-client relationship. It is not intended to be, and should not be used as, a substitute for taking legal advice in any specific situation. DLA Piper will accept no responsibility for any actions taken or not taken on the basis of this publication. This may qualify as “Lawyer Advertising” requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.Copyright © 2019 DLA Piper. All rights reserved. | APR19 | A00091

apa & map country guide 2019 – israel

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