Readers are invited to send in their Israeli tax questions to this column. Please keep them general. Here are two recent questions. How can our Israeli company cope with the recession? Here is a selection of ideas to check out:
Repatriate cash from foreign subsidiaries: Dividends distributed to an Israeli resident company in 2009 will be subject to only 5 percent tax (instead of 25% usually) if certain conditions are met. This applies to dividend income from a foreign source, which is used in Israel in 2009, or within one year after actual receipt of the dividend, whichever is later.
Alternatively, dividend income may be offset against current-year losses from a business or securities, as well as current-year passive losses from a foreign source, such as exchange losses on loans to foreign companies.
Internal reorganization: Take advantage of lower market values to reorganize a group corporate structure ahead of any exit or IPO (initial public offering).
Recharge your Israeli headquarter costs to foreign subsidiaries: This must be done in a reasonable way. There may sometimes be a double advantage: (a) lower tax on such amounts in Israel than abroad if the Israeli company enjoys tax incentives or has tax losses; (b) use of money in Israel without declaring a dividend.
Update your transfer pricing: If a profit-based method is used to set prices of cross-border transactions within a group of companies, the present climate of reduced profits or even losses may justify a transfer-pricing amendment that shifts profits.
Review your intercompany finance: Current market risks may justify an increase in interest rates on intercompany loans or other arrangements such as profit-sharing joint ventures. Don't forget to address foreign-exchange exposures.
Supply-chain improvements: Consider whether to move from local procurement to central procurement via an entity located in an appropriate tax-efficient location. Also consider placing intangible assets (technology, brand names, etc) in a tax-efficient regime, such as the Israeli privileged-enterprise regime, while asset values are low.
When is my personal tax return due?
Individuals required to file a tax return for the 2008 tax year must do so by May 31, 2009. Not everyone is required to file a tax return; consult an accountant if you are unsure. The due date for people not in business (and not required to keep double entry books) was postponed from April 30 to May 31 this year due to Pessah and other events.
As always, consult experienced professional advisers in each country at an early stage in specific cases.
Leon Harris is an international tax specialist.