Your Tax in '06: Exemption for foreign investors

In the past, Israel has lost out by seeking to tax foreign investors in full on their capital gains.

By LEON HARRIS
December 14, 2005 07:16
2 minute read.

 
X

Dear Reader,
As you can imagine, more people are reading The Jerusalem Post than ever before. Nevertheless, traditional business models are no longer sustainable and high-quality publications, like ours, are being forced to look for new ways to keep going. Unlike many other news organizations, we have not put up a paywall. We want to keep our journalism open and accessible and be able to keep providing you with news and analyses from the frontlines of Israel, the Middle East and the Jewish World.

As one of our loyal readers, we ask you to be our partner.

For $5 a month you will receive access to the following:

  • A user experience almost completely free of ads
  • Access to our Premium Section
  • Content from the award-winning Jerusalem Report and our monthly magazine to learn Hebrew - Ivrit
  • A brand new ePaper featuring the daily newspaper as it appears in print in Israel

Help us grow and continue telling Israel’s story to the world.

Thank you,

Ronit Hasin-Hochman, CEO, Jerusalem Post Group
Yaakov Katz, Editor-in-Chief

UPGRADE YOUR JPOST EXPERIENCE FOR 5$ PER MONTH Show me later

Until now, subject to any tax treaty, Israel has generally imposed capital gains tax on sales of Israeli securities by Israeli and foreign resident investors. This is unlike the practice in the US, UK and other countries. Under Amendment 147 to the Income Tax Ordinance, an exemption will now apply from Israeli capital gains tax for individual investors in Israeli securities who have been resident for at least 10 years preceding the date of acquisition of the investment in a country that has a tax treaty with Israel, if they acquire their investment between July 1, 2005 and the end of 2008 and notify the Israeli Tax Authority of their acquisition within 30 days. This exemption will also apply for 10 years to foreign investors who migrate to Israel and to returning Israeli residents after living abroad for three years. This assumes the gains are not attributable to a permanent establishment (generally a fixed place of business) nor shares in companies that principally owned real estate at the time of the investment and in the two years before the sale. If the investor is an entity, at least 75% of all means of control must be held by individuals resident in such a treaty country in the 10 years preceding the date the investment was acquired. However, in the case of an entity that is resident in such a treaty country with securities publicly traded on a stock exchange outside Israel, shareholders holding less than 10% would be presumed to be resident in a treaty country unless the opposite is proven. This capital gains tax exemption for foreign investors is welcome even though it is hedged by conditions. In the past, Israel has lost out by seeking to tax foreign investors in full on their capital gains. It is to be hoped the exemption will be extended beyond 2008 and on more lenient conditions since not everyone resides in the 37 countries that have tax treaties with Israel. Leon.harris@il.ey.com The writer is an International Tax Partner at Ernst & Young Israel

Join Jerusalem Post Premium Plus now for just $5 and upgrade your experience with an ads-free website and exclusive content. Click here>>

Related Content

The Teva Pharmaceutical Industries
April 30, 2015
Teva doubles down on Mylan, despite rejection

By GLOBES, NIV ELIS