Can they tax the moon?

Is Israel’s worldwide taxation system space-wide too?

April 18, 2019 23:30
3 minute read.
Beresheet takes a selfie minutes before touching down on the moon

Beresheet takes a selfie minutes before touching down on the moon . (photo credit: SCREENSHOT SPACEIL YOUTUBE)


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On April 11, Israelis and others were glued to their TV screens and YouTube as the Beresheet spacecraft reached the moon and nearly landed successfully. This was a major achievement and nobody was hurt. Beresheet means in the beginning. An early question coming to mind is if Beresheet had made it to the moon and generated scientific data for a commercial profit, would it be taxable? Is Israel’s worldwide taxation system space-wide too?

The same question arises with regard to the administered territories, i.e. Judea and Samaria. The question is whether the moon is a separate country? Or is it part of Israel? Can Israel tax a moon profit? Can other countries? It seems we have at least three years to answer these questions before Israel hopefully launches Beresheet 2 to the moon.

Following is some conjecture on the subject – readers are invited to provide their comments.

The moon’s status:

The UN Committee on the Peaceful Uses of Outer Space considers itself the forum for the development of international space law. The committee has concluded several treaties, including an Outer Space Agreement and a Moon Agreement. Israel has ratified the Outer Space agreement, but not the Moon Agreement. The same applies to the United States.

The Outer Space Agreement was passed by the UN Generally Assembly in Resolution 2222 (XXI) in 1966 and is formally known as: Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, including the Moon and Other Celestial Bodies.

According to the Outer Space Agreement, the exploration and use of outer space, including the moon and other celestial bodies, shall be carried out for the benefit and in the interests of all countries and shall be the province of all mankind (Article 1). Outer space, including the moon and other celestial bodies, is not subject to national appropriation by claim of sovereignty (Article 2). International law and the UN Charter apply (Article 3). The moon and other celestial bodies shall be used by all states parties to the treaty exclusively for peaceful purposes. (Article 4). A state party to the treaty, on whose registry an object launched into outer space is carried, shall retain jurisdiction and control over such object, and over any personnel thereof, while in outer space (Article 8).

The UN reports that 109 countries (including Israel) have ratified the Outer Space Agreement as of January 1, 2019.

The Moon Agreement was passed by the UN General Assembly in 1979 but the few countries that signed up have yet to apply it. It called for an international regime be set up to ensure safe and orderly development and management of moon resources and equitable sharing of benefits from them. No such regime has yet been established and Israel is not a party.

Can Israel tax foreign residents on moon profits?

As mentioned, the Outer Space Agreement says that no country can claim sovereign rights – these are considered to include taxation rights.
Therefore, Israel cannot tax foreign residents on moon activities the same way it taxes gas profits from drilling on the continental shelf of the Mediterranean, beyond Israel’s territorial waters, i.e., more than 12 nautical miles from the Israeli coast.

Can Israel tax the moon  profits of Israeli residents?

Yes, apparently. Israel taxes Israeli resident individuals and companies on a personal basis on income accrued in Israel or outside Israel. Outside Israel includes the moon.

Foreign Countries?

The engine of Beresheet was apparently supplied by a UK company and there were private investors from several countries.
Would a foreign investor be taxed on moon-related profits and receive a credit for Israeli tax on moon-related profits? This would depend on the structure adopted and interpretation. One of the perennial issues is where is Israel?
The UK-Israel tax treaty defines “Israel” as: the territory in which the Government of Israel levy taxation. But the US-Israel tax treaty defines Israel as the State of Israel and the adjacent sea.

To sum up:

If Israel takes another crack at sending a moonshot and profits ensue, taxes may also ensue. In the meantime, expense deductions and grants are still needed for the substantial space R&D expenditure involved. We aren’t there yet. Wishing readers a Happy Pesach, the season of our universal freedom.
As always, one should consult experienced tax advisers in each country at an early stage about specific cases.

The writer is a certified public accountant and tax specialist at Harris Horoviz Consulting & Tax Ltd.

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