New Israeli tax guidelines target Google, FacebookApr. 12, 2016
The Israeli Tax Authority released a circular explaining how it would tax foreign digital companies – such as Google and Facebook – who do business in Israel.
The circular said that companies that are not based in Israel can be subject to tax on revenues if they offer their services to Israelis via the Internet. Previous taxation laws, which were written before Web commerce became so significant, only levied such taxes on companies that had production facilities in Israel.
If a company were based in countries with which Israel had a tax treaty, it would only be taxed if it were considered a “permanent establishment” here, defined as the enterprise or its agent having a physical, permanent location for carrying out its business.
The authority also said such companies doing significant business in Israel would have to register with the Value- Added Tax division.
Because Internet-based companies can rack up significant sales without having a physical sales office, however, the Tax Authority is seeking a new approach.
Erez Tsur, the chairman of the hi-tech umbrella group IATI (Israeli Advanced Technology Industries), called for a “responsible tax policy” that would not “damage one of the important growth engines in Israel.”
Already, he argued, Israel had a tough time competing for hi-tech investment with other countries.
“The tax increase in the Tax Authority circular further harms the ability of Israeli hi-tech to compete globally, and adds burden to the multi-national companies in Israel,” Tsur said. “Do we have to kill the hen that lays golden eggs so we can enjoy its meat and feathers?” he asked.
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