Israel signs tax treaties with Estonia, Georgia

Israel has signed a tax treaty with Estonia andhas reached an agreement on new tax relief clauses with Georgia, aspart of the government's efforts to provide incentives for mutualinvestments and facilitate the activities of Israeli companies abroad.
"Thisis an additional step in the implementation of the Finance Ministry'splan to remove tax obstacles that hurt international trade, encouragemutual investments, and to make it easier for Israeli companies to dobusiness abroad," said Ofir Levy, director of the InternationalTaxation Department at the State Revenues Administration.
The new treaties are part of the Treasury's policy to promotenew tax agreements with key countries that are members of theOrganization of Economic Cooperation and Development.
The agreements are based on the OECD model, which focusestaxation in the country of residence and reduces taxation in thecountry in which the economic activity is carried out, or from whichpassive income such as dividends, interest or royalties is paid.
Thus, the tax treaty with Estonia states thatIsraelis will be exempt from paying taxes to Estonia on capital gainsrealized there, and will instead pay tax only in Israel. The same willapply to Estonians, meaning that tax on capital gains from business inIsrael will be paid in their home country, in an effort to avoid doubletaxation. The exception to the tax-relief rules are real estate deals.
The Finance Ministry said that the treaty with Estonia wasimportant since, like Israel, it is expected to join the OECD at thebeginning of 2010. Estonia is one of the last remaining countries inthe European Union with which Israel has not yet signed a treaty.
The new accord signed with Georgia seeks toimprove the competitiveness of Israeli companies doing business in realestate and infrastructure in that country.
It was agreed that each country would take the necessary stepsfor the tax agreements to go into effect at the beginning of 2010.