Israel has signed a tax treaty with Estonia and
has reached an agreement on new tax relief clauses with Georgia, as
part of the government's efforts to provide incentives for mutual
investments and facilitate the activities of Israeli companies abroad.
is an additional step in the implementation of the Finance Ministry's
plan to remove tax obstacles that hurt international trade, encourage
mutual investments, and to make it easier for Israeli companies to do
business abroad," said Ofir Levy, director of the International
Taxation Department at the State Revenues Administration.
The new treaties are part of the Treasury's policy to promote
new tax agreements with key countries that are members of the
Organization of Economic Cooperation and Development.
The agreements are based on the OECD
model, which focuses
taxation in the country of residence and reduces taxation in the
country in which the economic activity is carried out, or from which
passive income such as dividends, interest or royalties is paid.
Thus, the tax treaty with Estonia states that
Israelis will be exempt from paying taxes to Estonia on capital gains
realized there, and will instead pay tax only in Israel. The same will
apply to Estonians, meaning that tax on capital gains from business in
Israel will be paid in their home country, in an effort to avoid double
taxation. The exception to the tax-relief rules are real estate deals.
The Finance Ministry said that the treaty with Estonia was
important since, like Israel, it is expected to join the OECD at the
beginning of 2010. Estonia is one of the last remaining countries in
the European Union
with which Israel has not yet signed a treaty.
The new accord signed with Georgia seeks to
improve the competitiveness of Israeli companies doing business in real
estate and infrastructure in that country.
It was agreed that each country would take the necessary steps
for the tax agreements to go into effect at the beginning of 2010.