Israel’s tax authority in November 2018 published guidance that presents its position regarding the identification and characterization of a business restructuring involving multinational entity (MNE) groups; the associated tax implications; and the specific valuation criteria for the functions, assets, and risks (FAR) of the business in question.
The guidance—Circular No. 15/2018 (English*) [PDF 1.1 MB] (Hebrew) [PDF 888 KB]—is based on the tax authority’s interpretation of Chapter IX of the OECD Transfer Pricing Guidelines regarding transfer pricing aspects of business restructurings, as well as Gteko Ltd. v. Kfar Saba Tax Assessor, T.A. 49444-01-13 (6 June 2017), a court decision that is considered to be precedent in this area.
*An unofficial English translation of the original Hebrew, provided by the KPMG member firm in Israel
Circular No. 15/2018 defines a business restructuring quite broadly to include the transfer, or even cessation, of existing business activity—in particular within the context of an acquisition by a foreign entity.
For more information, contact a tax professional with KPMG’s Global Transfer Pricing Services practice in Israel:
David Samson | (+972) 3.684.8970 | firstname.lastname@example.org
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