Tax Controversy 2020

Last Updated May 20, 2020


Law and Practice


Herzog Fox & Neeman has a tax department comprised of 45 members (including 15 partners), of whom nine are also Certified Public Accountants, ten studied in leading universities outside Israel and five have held senior positions at the Israel Tax Authority (ITA). HFN has acted in tax litigation and tax disputes before the ITA and Israeli courts, and in mutual agreement procedures (competent authority). Over the past year HFN has represented: multinational technology groups in Israeli and cross-border tax disputes, including regarding transfer pricing and business-restructuring matters; one of the largest US global asset management firms in a dispute concerning its Israeli investments and sale of shares; a US digital corporation and its group entities in an income tax audit and a value-added tax audit; an Asian conglomerate in a tax dispute concerning its Israeli sales activity; and a US high net worth individual with respect to a tax audit commenced by the ITA regarding taxation of S corporations.

Many tax controversies are initiated as a consequence of examination by the Israeli Tax Authority (ITA) of tax returns – for example, self-assessments and value added tax (VAT) returns – or tax withholdings filings. Other causes of tax controversies include tax audits, requests to amend tax returns, requests for exemption from or reduction of withholding tax, requests for tax refunds, ruling requests and notices to the ITA (such as notices of transactions). A tax controversy regarding a certain tax issue may also trigger controversies in other kinds of taxes. For example, an income tax audit may trigger a VAT or real estate tax audit or social security audit. Similarly, a civil tax audit may trigger a criminal investigation and vice versa.

There are no formal statistics as to which taxes or tax matters give rise to the most controversies. In general, the more significant the matter or where a legal or tax principle is concerned, the greater is the chance that it will trigger an audit or give rise to controversy. Low tax amounts in dispute (less than a few hundred thousand Israeli new shekels (ILS)) are not usually the subject of litigation, except in rare cases where the matter has implications on other matters regarding the taxpayer or if the matter in dispute is considered as constituting one of principle, either to the ITA or to the taxpayer. Where the amount of tax involved is large, there are tax controversies involving billions of ILS in cases of individuals and corporations.

A tax controversy may be avoided through a ruling procedure, under which the ITA's position can be confirmed in advance. Tax opinions can mitigate the risk of criminal liability but not the risk of a civil tax controversy.

The Base Erosion and Profit Shifting (BEPS) recommendations of the OECD contribute to an increasing number of tax controversies in Israel. Prior to the final BEPS recommendations, the ITA had already adopted in various matters, by way of administrative circulars or practices, a stricter and more tax-maximising approach than those eventually adopted in the BEPS recommendations. This includes issues regarding the digital economy, transfer pricing, permanent establishment and VAT. At the same time, the ITA views the final BEPS recommendations as a source for legitimacy and policy justification for the ITA's positions in related matters. The ITA also views the indecisiveness and lack of a coherent global policy in certain matters (such as those affecting the digital economy) as an opportunity to take an independent approach and thereby to affect the implementation of the BEPS recommendations.

Once the ITA issues an assessment, the taxpayer is required to pay the additional tax liability unless the taxpayer files an administrative appeal (an Objection) against the assessment. In this case, the taxpayer is obliged to pay only the tax that is not in dispute. If the ITA does not accept the Objection and issues an order (a second-stage assessment) then the taxpayer must pay the tax in dispute unless the taxpayer files an appeal to the District Court. However, the tax liability, as decided in the ruling of the District Court, must be paid by the taxpayer even if the taxpayer files an appeal to the Supreme Court against the ruling of the District Court (unless the Supreme Court decides differently, which is extremely rare). In any event, the tax that is in dispute bears interest and linkage differentials (Consumer Price Index) during the time in which the taxpayer is not required to pay it. As long as the tax in dispute is not paid, the income tax and VAT authorities have the authority not to make certain refunds to the taxpayer.

In circumstances in which the ITA is concerned that the taxpayer will not be able (or willing) to pay the tax it owes (for example, the tax in dispute is substantial or the taxpayer does not have sufficient financial resources in Israel), the ITA may ask the taxpayer to provide guarantees. If the taxpayer does not provide guarantees that are acceptable to the ITA, the ITA may approach the court to place a lien on the assets of the taxpayer or to prohibit the taxpayer (or officers or shareholders of the taxpayer) from travelling outside Israel. Failure to provide the requested guarantees may prevent the taxpayer from appealing against the tax assessment.

A civil tax proceeding may lead to the initiation of criminal proceedings and vice versa. In general, there is no automatic suspension of civil proceedings due to the existence of criminal proceedings and vice versa.

Pursuant to the state of emergency that has been declared in Israel following the outbreak of the novel coronavirus, the Israeli government promulgated emergency regulations. These regulations extended deadlines for various pieces of legislation relating to taxes, with respect to taxpayers' reporting deadlines and especially with respect to the deadlines applicable to the tax authorities. In general, any deadline in tax audits and administrative tax appeals that falls within the relevant periods (22 March 2020 to 31 July 2020) was extended by 70 days. Also court proceedings in tax matters, including court hearings and submission deadlines, were stayed for almost two months (from 16 March 2020 to 10 May 2020). These extensions will cause certain delays in administrative and judicial tax proceedings.

At the same time, in light of the significant economic challenges and the increasing government deficit (which already existed before the COVID-19 pandemic) we expect the ITA to push strongly – more than before – to advance and conclude tax proceedings and appeals, and to strive for a fast collection of tax.

The ITA has already approached representatives of taxpayers in significant tax controversies in advance stages of litigation or administrative proceedings, to consider whether settlement is possible. In addition, to expedite tax proceedings, the ITA may, among other things, be stricter with granting extensions to taxpayers, ask courts to rule significant court expenses against the taxpayer (if the taxpayer's appeal is rejected), and ask taxpayers to more frequently provide guarantees for the tax amounts in dispute.

The ITA may also issue assessments and advance proceedings in tax issues (mostly BEPS-related) that, so far, have been under the review and consideration of the ITA's management.

In general, all tax returns are examined on a random basis, with different selection rates depending on the type of taxpayer (individuals, corporations, relevant field of activity). Those individuals and corporations considered as being "significant" are usually audited on a yearly basis. In addition, the ITA has internal guidelines (not all of which are made public), which are updated from time to time, that set out the main considerations for initiating tax audits. The guidelines include criteria regarding:

  • the magnitude of the self-assessments;
  • the turnover or the balances reported;
  • certain business sectors;
  • profitability rates;
  • certain types of incomes (capital gains, exempt income, non-Israeli income);
  • a taxpayer who has reported (as required under the law) a special tax position, issued an opinion or entered into a transaction;
  • a taxpayer who has requested a ruling or a tax refund;
  • the situation where the taxpayer's auditor’s opinion concerning the financial statements or tax returns was not without reservations;
  • a taxpayer whose books were previously disqualified by the ITA;
  • a taxpayer who has been investigated by the ITA; and
  • the incoherency of a taxpayer's various tax filings.

The guidelines also include special topics of interest such as transfer pricing in multinational group entities, M&A and intercompany financing, and tax incentives.

At the same time, the field tax office entrusted with a specific case has discretion with respect to the initiation of tax audits. In this regard, the question of whether an audit is initiated can be influenced, for example, by an office’s staff availability, the expertise and qualifications of a tax office, and the familiarity of a tax office with the various issues. In certain particularly important issues for the ITA, or in across-the-board issues, all the tax audits on such issues (including the decision of whether to initiate a tax audit) can be supervised by a special professional steering team consisting of the management of the ITA. In recent years, the ITA has recruited a significant number of inspectors (auditors) and university graduates conversant in English, and allocated them among the various field offices to mitigate the differences between the field tax offices. These steps, together with an increasing use of digital databases by tax inspectors, has resulted in an increasing number of tax audits each year.

The ITA may issue a tax assessment until the end of the fourth tax year from the end of the tax year in which the tax return (self-assessment) was filed. VAT assessments can, in general, be issued within five years from the submission of the relevant VAT return. If a taxpayer has been indicted by a court for certain tax offences or paid a ransom, the ITA may issue a civil tax assessment one year following such indictment or payment, even if the applicable civil statute of limitations period has already elapsed.

The duration of the tax audits varies from case to case and can be influenced, for example, by the complexity of the case, the co-operation of the taxpayer, the involvement of other taxpayers or other departments of the ITA that are involved in the case, collection-of-information efforts, negotiations, and the existence of other similar or related tax audits, or similar cases pending before courts. In many cases, the ITA exhausts the entire audit period and issues the assessment near the end of the statute of limitations period. In this regard, a tax audit does not suspend the statute of limitations period. Accordingly, the audit must be completed before the statute of limitations period elapses.

In general, audits take place at the offices of the relevant tax office. Tax inspectors may, at their own discretion, visit the taxpayer's premises, which is common during the audit process, particularly in the case of corporations. Audits are based on both printed documents and data made available electronically. The ITA often requests that the taxpayer submit an electronic file called a Unified Format File that contains significant information regarding the taxpayer. The ITA usually requests that the taxpayer provide data in both printed and soft copy (computer files) form.

Auditors usually begin by examining general aspects such as the dates of legally required tax returns and notices, the existence of proper documentation (eg, expenses, tax withholding certificates, foreign tax credit) and any foreign tax payments or confirmations of donations, the group structure and related parties.

Substantive issues that currently appear to attract the attention of tax auditors include:

  • taxation of digital economy;
  • permanent establishment;
  • transfer pricing;
  • intercompany financing and balances;
  • business restructuring and the transfer of functions, assets and risks (FAR);
  • proper tax withholding;
  • tax incentives; and
  • opinions received by the taxpayer.

With regard to VAT audits, the main substantive issues include the "recapturing" of input VAT, occasional transactions, real estate transactions, activities in the capital markets, as well as the activity of non-Israeli companies in Israel.

This firm is not aware of a significant increase in the number of audits due to the cross-border exchange of information. However, the new rules have influenced the ITA's mindset and its willingness to settle in certain audits. For example, the ITA has taken a relatively strict position in audits resulting from voluntary disclosure procedures based on the assumption that even if the taxpayer does not disclose the information, the ITA would eventually be able to obtain the relevant information from the relevant foreign tax authorities.

Have Legal Representation from the Early Stages of the Audit

Audits are legal proceedings and have legal implications. Tax inspectors are consulted by the ITA’s legal department at the time of the audit. Mistakenly waiving rights or arguments that should have been argued at the first possible opportunity possible, not providing all the factual and legal reasoning to the merits, or failing to meet certain ITA requirements on time (if there is no justification to object) may significantly adversely affect the taxpayer’s case at the next stages of the controversy. Accordingly, lawyers are now involved in tax audits from the initial stage of the proceedings and not only when the case gets to court.

The Distinction Between Civil and Criminal Proceedings

In certain cases (such as VAT audits), it is not always clear whether the proceedings are civil or criminal. However, different rules and rights apply in civil and criminal proceedings, and it is important to obtain a clear view as to the nature of the proceedings taken against the taxpayer.

Be Represented

A representative of the taxpayer can attend any meetings and communication with the ITA (except for certain criminal proceedings).

The Procedure is Strategic

There are no "off the record" discussions with the ITA. Any informal talks with the ITA (if not defined as "negotiations") could be used by the ITA as evidence against the taxpayer.

Written records of any communication with the ITA should be maintained (eg, delivery of information, arguments or complaints raised before the ITA, extensions granted by the ITA, requests made by the taxpayer, the ITA's arguments and responses). Mere oral communication is not sufficient, and it is difficult to use it in evidence or prove it at later stages.

Protocols of audit meetings should be asked for, the ITA must provide them.

Any right or procedural argument must be raised at the first possible opportunity (eg, regarding the statute of limitations or legal privilege). Otherwise, such a right or argument may be considered as having been waived and will not be heard later.

Although the power of the ITA to collect or request information is very broad, it is still restricted, for example, by reasons of legal privilege, rules of international law (eg, the documents of foreign companies) and statutory restrictions on the collection of certain information (eg, access to computer and digital information requires the obtaining of a court order; moreover, there is a prohibition on interviewing employees and former employees of the taxpayer).

Taxpayers should prevent "fishing exercises" for information; they must insist on clear arguments and questions by the ITA.

Negotiations Have to be Timed Properly

In general, the more advanced the process, the more people are involved and the greater the alleged tax liability is, making it more difficult to reach an agreement. However, compromising with the ITA at a premature stage may result in a settlement that can be excessive in amount or considered by non-Israeli tax authorities as a voluntary tax payment that cannot be deducted.

The administrative claim phase is generally mandatory before the judicial phase. A taxpayer is required to file its Objection (administrative appeal) against the assessment issued by the ITA within 30 days from the date on which the taxpayer received the tax assessment, unless the taxpayer has received a written extension from the ITA. The same timeframe applies to a VAT administrative appeal. An administrative appeal against a tax withholding assessment must be filed within two weeks from the issuance of the assessment. The Objection has to be filed to the same tax office that issued the assessment.

The Objection has to include all the factual and legal arguments, and the main supporting documents. The taxpayer may not be able to bring or raise such facts and legal arguments at later stages if they have not already been raised and presented in the Objection document and during the stage of the administrative appeal.

The administrative appeal (at the Objection stage) is similar to the initial tax audit. The case is examined from the outset by a different team from the same tax office. At the same time, at the administrative appeal stage, the professional department of the ITA’s headquarters (in addition to the tax office) and higher-level ITA officers are usually involved. The taxpayer has the right to receive from the ITA all the materials and documents relating to the assessment.

In making a decision in the administrative appeal, the ITA is not bound by the first-stage assessment. The decision in the administrative appeal can be based on different factual or legal arguments (even if these contradict the first assessment) and the decision in the appeal could decrease as well as increase the tax liability argued by the ITA.

The deadline for the ITA to decide an administrative appeal (to settle the matter or to issue a second-stage assessment, which is called an Order) is the later of one year from the date of the submission of the appeal or four years from the end of the tax year in which the tax return was filed. In VAT matters, the deadline for the ITA is one year from the date of the submission of the administrative appeal. If the ITA does not issue another assessment by the end of this period, then the administrative appeal is considered to have been accepted by the ITA and no further steps need to be taken by the taxpayer.

A tax order (a second-stage tax assessment) issued by the ITA or dismissal of the VAT administrative appeal can be appealed to a District Court. The jurisdiction of the relevant District Court is determined on the basis of various parameters, including which tax office audited the taxpayer and the address of the taxpayer. A tax appeal is heard before a single judge who examines and decides on the facts and the legal arguments.

In order to initiate a tax appeal, an appeal notice must be filed to the court within 30 days from the date on which the ITA's order was served on the taxpayer. In income tax cases, the notice is a short document that mainly provides the income and tax amounts in dispute. In VAT matters, the appeal notice has to include all the factual and legal arguments in details.

After the initiation of the income tax appeal through the submission of an appeal notice, the ITA has 30 days to file its arguments against the assessment and the taxpayer will then have 30 days to file its arguments for the appeal (following the submission by the ITA). Usually, both parties request extensions. The arguments for the appeal have to include all the factual and legal arguments, and the main supporting documents (contradicting factual arguments are generally not allowed, while contradicting legal arguments are generally considered as being legitimate). Otherwise, the taxpayer may not be allowed to raise these arguments before the court. In VAT appeals, the appeal is initiated with a detailed appeal notice of the taxpayer and the VAT Authority has 30 days to submit its detailed response.

Until the first court hearing, the taxpayer can file procedural and preliminary requests (for example, document disclosure requests and questionnaires). After the arguments for the appeal are filed, the court usually holds a court hearing to discuss the procedural and preliminary requests, and to set the procedures for the evidentiary stage.

After the evidentiary stage, summations are filed in court, both by the taxpayer and the ITA. Thereafter, the taxpayer's summations-in-response are filed. The court will then render its judgment in writing.

In most cases, testimonies-in-chief (the equivalent of the US "direct examination") are given is writing while cross-examination of witnesses is oral, at a court hearing. Documents need to be served as evidence to court through the witnesses (either directly or at the stage of cross-examination). Only those documents that were disclosed and exchanged between the parties at the earlier stages (for example, during the audit, the submissions to court and the disclosure stage) can be served as evidence to the court.

The general rule in a civil tax appeal is that the burden of proof rests on the taxpayer. However, if the argument of the ITA in the appeal concerns the bookkeeping of the taxpayer, which was not disqualified by the ITA, or if the main argument of the ITA is that the relevant transactions are artificial, then the burden of proof would rest on the ITA (however, this only occurs relatively rarely). In addition, if the ITA argues for a transfer pricing adjustment in a case where a transfer pricing study has been submitted by the taxpayer then the burden of proof will also rest on the ITA. In criminal cases the burden rests on the ITA.

Tax Litigation is Tax and Litigation

Tax litigation before a court of law involves not only tax but also substantive litigation issues. Tax appeals are sometimes unjustly regarded less as litigation and more as tax procedures. This firm considers that approach to be inherently flawed. Both tax expertise and expertise in litigation are crucial to the actual court case. An in-depth understanding and knowledge of litigation and its procedures – including with respect to the applicable pleadings; the application of the limitation periods; the burden of proof, testimonies and cross-examinations; the use of experts; document disclosure (discovery and questionnaires); and written summations – can make a considerable difference and improve the position of the taxpayer in court.

Mutual Agreement Procedure (MAP)

Initiation of a MAP is a strategic measure in cross-border cases. In order to make sure that the judicial appeal proceedings will be stayed until the exhaustion of the MAP and to preserve certain procedural advantages, the initiation of the MAP needs to be carefully considered and planned in advance, preferably before the initiation of the judicial appeal.

Payment of the Tax in Dispute

There is no obligation to pay the tax in dispute until the District Court publishes its ruling in the case. In fact, by not paying the tax in dispute, a taxpayer provides a greater incentive to the ITA to settle in order to expedite collection. At the same time, the taxpayer needs to bear in mind that the tax in dispute bears 4% interest and linkage differentials until actual payment.


Negotiations can also take place during the tax litigation stage in court. If a settlement is not reached before the court proceedings, then negotiations will usually become relevant again further to the comments or recommendations of the judge during the court hearings, the evaluation of the State Attorney of the ITA's chances of success in the case and the potential implications of a court ruling, or initiation of a MAP.

Israeli courts use non-Israeli resources – in particular from the USA, the UK and other OECD countries – as a source for the interpretation of the law. Such resources include:

  • the model tax treaties of the OECD, the USA and the UN, and their commentaries;
  • OECD reports and guidelines;
  • circulars and guidelines issued by non-Israeli tax authorities (mainly the IRS);
  • non-Israeli case law; and
  • academic articles.

The ITA and the taxpayer can file an appeal to the Supreme Court on the ruling rendered by the District Court. The Supreme Court examines only the legal questions and does not examine the facts. After the Supreme Court renders its rulings in the appeal, no further appeal is possible. However, it is possible to request an "additional review" by the Supreme Court, in the case where the Supreme Court's decision is novel or contradicts former binding precedents and will have significant implications on many taxpayers, and not only on the matter concerning the specific taxpayer. However, such a request is accepted only in rare cases.

The appellant files a notice of appeal to the Supreme Court, which will then order the parties to submit a brief that summarises their main arguments in the appeal and a court hearing may then be scheduled. Summations may be heard orally or submitted in writing, or the court may decide without the need for summations.

Appeals before the Supreme Court are heard by three justices, who are allocated to cases by the secretariat of the Court or by the Chief Justice of the Supreme Court.

There are no tax-related alternative dispute resolution (ADR) mechanisms in Israel. In the case of a tax controversy between the ITA and a government entity, the controversy must be brought before the Attorney General of Israel and the Director of the Government Companies Authority (where government companies are involved) prior to initiating court proceedings.

The procedure before the Attorney General for controversies related to government entities is not strictly defined. The rules imply that the procedure is in the nature of a mediation or negotiations with the assistance of the Attorney General. However, the ITA usually requires that the procedure take place as an arbitration and that the parties be subject to the decision of the arbitrator. In any case, if the parties do not agree with regard to the procedure or if the parties do not accept the decision made under that procedure then the controversy can be litigated in court.

The ITA may issue advance tax rulings, which are issued by the professional department within the headquarters of the ITA. In certain cases, the taxpayer is obliged to obtain a ruling to take a certain tax position or to execute certain transactions (for example, in the case of tax-free mergers). A tax ruling that is issued by way of an agreement between the ITA and the taxpayer is binding. If the ITA issues a ruling that is not with the agreement of the taxpayer (such that the ITA refused the tax treatment requested by the taxpayer) then the taxpayer can file an appeal against the ruling. The ruling usually states that it is based on the facts presented by the taxpayer, which have not been reviewed by the ITA. It is also possible to reach an advanced pricing agreement (APA), which can be unilateral, bilateral or multilateral. The field tax office may examine the facts during tax audits. If the facts were incorrect or not complete, then the ruling could be void or cancelled. An APA cannot be issued by the field tax offices. However, it is possible to reach an agreement to settle an ongoing matter.

See 6.1 Mechanisms for Tax-Related ADR in this Jurisdiction6.3 Agreements to Reduce Tax Assessments, Interest or Penalties for relevant information.

See 6.1 Mechanisms for Tax-Related ADR in this Jurisdiction6.3 Agreements to Reduce Tax Assessments, Interest or Penalties for relevant information.

See 6.1 Mechanisms for Tax-Related ADR in this Jurisdiction6.3 Agreements to Reduce Tax Assessments, Interest or Penalties for relevant information.

Israeli tax laws provide for the imposition of criminal liability for various actions, or failures to act, whether intentional or unintentional. Under the Israeli VAT Law, any failure to comply with the law constitutes, in principle, a criminal offence. The Israeli Administrative Offences Law sets out offences that could be subject to administrative fines instead of criminal charges.

The ITA does not implement the applicable criminal provisions on every matter that is covered under such offences, and not every case of underpayment of taxes triggers criminal (or administrative) proceedings. In general, the use of criminal or administrative proceedings is less frequent in income tax matters and more common in VAT cases. Cases of gross negligence, intentional misconduct or fraud are more likely to result in prosecution. Taxpayers who have based their position on a written opinion issued by a tax expert are unlikely to be prosecuted. As a general matter, the use of general anti-avoidance rules (GAAR) or specific anti-avoidance rules (SAAR) by the ITA would not result, in itself, in criminal charges against the taxpayer. However, in the case of a "fictitious transaction" (namely, a false transaction that never took place), criminal liability could ensue.

Criminal proceedings can be initiated in various ways, such as:

  • at the initiative of the ITA's Investigations Tax Office;
  • through a reference of the matter to the Investigations Tax Office by the civil tax office; and
  • owing to information received by the Investigations Tax Office.

Within the context of a VAT matter, a criminal investigation can be initiated by any VAT inspector (not only by the Investigations Tax Office). Moreover, a VAT civil audit can instantly be transformed into a criminal investigation, at the discretion of the VAT inspector (namely, a civil audit meeting can be immediately transformed into a criminal investigation).

Administrative proceedings can be initiated by the civil tax office in which the taxpayer's tax file is registered. For example, since administrative infringements are of a technical nature, the civil tax office can conduct a special search on the ITA's data systems (SHAAM) to identify taxpayers who have allegedly committed such infringements. In addition, according to internal ITA procedures, any member of the ITA’s personnel who encounters a case that could result in an administrative fine should inform the relevant local office of such a case.

It should be noted that the ITA is authorised to impose "deficit fines" equal to 15–30% of the tax required by the ITA in excess of what was stated in the tax report under the self-assessment of the taxpayer. Such deficit fines constitute a civil sanction and not a criminal or administrative sanction.

As a general matter, cases that constitute an administrative offence will be treated as such and criminal proceedings will not be initiated, except in special circumstances (such as repeated offences, significant amounts or where special deterrence is needed). Once an administrative process is initiated, taxpayers will not be prosecuted for the same offence, unless the taxpayers themselves request to be prosecuted and to face trial, instead of paying an administrative fine.

Criminal or administrative proceedings are separate to civil proceedings. Administrative or criminal proceedings can take place simultaneously with civil proceedings. The court will usually dismiss requests to stay civil court cases until after the criminal proceedings are concluded. Such requests may only be accepted in special circumstances, where the court is convinced that not staying the civil case will significantly and adversely affect the taxpayer's rights. Also, the internal guidelines of the ITA instruct the civil tax offices not to issue tax assessments where a criminal investigation is under way until the criminal investigation is completed (subject to statute of limitations constraints).

See 7.1 Interaction of Tax Assessments with Tax Infringements.

Once an administrative process has been initiated, the taxpayer will not be prosecuted for the same offence, unless the taxpayer asks to be prosecuted and to face a trial instead of paying an administrative fine.

Administrative Infringement Process

Once an infringement is identified by the ITA, it should carry out an internal process under which it will ensure that the required criteria for levying an administrative fine have been met. Once this preliminary stage is completed, the taxpayer should be summoned for a hearing in front of the relevant tax officer. If, prior to the hearing, the taxpayer rectifies the misconduct that was the reason for the hearing then the local office may consider not imposing an administrative fine (but only a civil fine, if applicable). Subject to the findings of the hearing, the fine will be imposed by the local tax office.

The taxpayer can submit a request to cancel the administrative fine, which must be submitted within 30 days, to a specific officer (who has been nominated by the Attorney General). The officer may cancel the fine but only if the officer finds that there has been no infringement, or that the infringement was caused not by the taxpayer, or that there is no public interest in a fine being imposed under the circumstances. If the officer rejects the taxpayer's request to cancel the fine, then the taxpayer may request to be prosecuted and to face trial with respect to the infringement.

Criminal Cases

Criminal cases usually commence with an investigation. The findings of the investigation are provided to the relevant prosecution department within the Attorney General’s office. The department will then examine the findings to decide whether to prosecute (in some cases, a decision to prosecute is subject to a hearing). In general, criminal tax cases are heard before a single judge of the Magistrate’s Court whereas the civil court case will be heard before a District Court.

Administrative fines may be reduced (at the discretion of the tax office) due to the payment of the civil tax liability, but only if the payment was made prior to the hearing (regarding the imposition of the administrative fine).

The ITA is entitled to withdraw criminal proceedings on the condition that the taxpayer makes what is referred to as a "ransom payment". The ransom amount is determined by the ITA and can be as high as twice the applicable fine that applies under the Israeli Income Tax Ordinance for the income tax offence, or the applicable fine itself in the case of a VAT offence. The ransom is not in lieu of the payment of the applicable tax liability, including interest and linkage differentials. Moreover, the payment of a ransom can be used as an evidence in a civil procedure, even though it is not regarded as a criminal conviction.

The main considerations published by the ITA, to be taken into account in deciding whether to convert the criminal proceedings into a ransom payment, are detailed below.

Considerations in Favour of Conversion

  • The leniency of the offence – the financial scope of the offence is relatively small; the degree of the taxpayer's guilt; prior rulings of the courts in similar cases.
  • The extent of the taxpayer's involvement and initiative in committing the offence (whether the taxpayer is an accomplice and not the principal offender or an accomplice).
  • The personal situation of the offender – including old age, serious illness or disability and personal adverse circumstances.
  • The situation of family members who depend on the offender.
  • The public interest in bringing the offender to justice – whether the harm resulting from prosecuting will exceed the benefits; the burden on the judicial system; and if there is need for deterrence in the circumstances of the particular case.
  • The rectifying of the criminal act by means of tax payment, amendments being made to the applicable tax reports, etc.
  • In exceptional cases, the following considerations will also be taken into account:
    1. the fact that the taxpayer was injured during his or her service in the Israeli army and has any other homeland security background – the contribution of the taxpayer to the public;
    2. the degree of co-operation of the taxpayer during the investigation process; or
    3. significant time delays – if such delays were not caused by the taxpayer.

Considerations Against Conversion

  • The taxpayer was previously given warnings; whether he or she had previous convictions; the offence has previously occurred in the taxpayer’s case; whether ransom payments were made by the taxpayer in former cases.
  • The severity of the offence – whether the financial scope of the offence is relatively significant; the duration of the occurrence of the offence; the failure to remove the offending act or omission.
  • An offence made by a representative of the taxpayer (lawyer, Certified Public Accountant, etc) within the framework of his or her position as representative.
  • The existence of any deterrence factor in certain industries (sectors in which offences have become very common).
  • An offence in a field that requires trust or loyalty.
  • Where, in addition to the tax offence, the taxpayer has committed other criminal offences under the general law.
  • An offer was made to the taxpayer to make a ransom payment in the past and he or she refused to do so.

The court's ruling in the first instance can be appealed to the higher instance by both sides (the taxpayer or the ITA). Assuming the first instance was the Magistrate's Court, the appeal will be submitted to the District Court. The ruling of the District Court (as a second instance) can be appealed to the Supreme Court but only if the Court grants its consent. A ruling of the Supreme Court cannot be appealed. A request can be made for an "additional review" by the Supreme Court in cases involving novel and principle legal issues, but such a request will rarely be accepted.

As a general matter, the use of general anti-avoidance rules (GAAR) or specific anti-avoidance rules (SAAR) by the ITA would not result, in itself, in criminal charges against the taxpayer. However, in the case of a "fictitious transaction" (namely, a false transaction that never took place), criminal liability could ensue. Also the "management and control" rule for determining the residency of a corporation was used as a basis for criminal proceedings, where the actual management and control over the corporation was exercised from a different country than the one reported.

Ordinary tax disputes and appeal proceedings apply also to double taxation situations (namely, administrative and judicial appeals). If the case involves treaty countries, then the taxpayer or the other parties affected by the assessment can request the relevant tax authorities to initiate a MAP. Unless the treaty provides otherwise, MAP requests are at the early stages of the court proceedings, after the administrative proceedings have been exhausted. If a MAP is initiated, the judicial appeal proceedings are usually stayed until the MAP is exhausted.

If a case involves non-treaty countries only, a MAP is not available. However, in at least one case involving a multinational, the ITA agreed to bring the case before a non-Israeli mediator as an alternative to a MAP. In addition, in certain circumstances, MAP may apply if the case involves both treaty and non-treaty countries in addition to Israel. Israel is not a signatory to any VAT treaties. Accordingly, Israeli courts have ruled in the past that Israeli VAT is to be charged, even if there is a double (VAT) collection.

Even though, according to the Israeli Income Tax Ordinance, double taxation treaties override Israeli domestic law, the position of the ITA, accepted in a District Court case, is that domestic anti-avoidance rules also apply to cases to which tax treaties apply.

Transfer pricing adjustments are challenged under domestic tax courts and the existing tax treaty mechanisms (MAP).

Unilateral, bilateral and multilateral APAs are available in Israel. However, they are not a common mechanism. In order to obtain an APA, the taxpayer must approach the ITA's transfer pricing department. The request under the APA has to include all the relevant details of the transaction and supporting documents, as well as the pricing arrangement that the taxpayer requests to approve. The ITA is required to provide its decision within 120 days (or 180 days in certain cases) from the day on which the ITA received the full request. If the ITA does not respond to this timeframe then the request is considered to have been approved by the ITA. It is usually possible to file an APA on a "no names" basis or to discuss the request on a no names basis before filing the request. However, an APA will not be provided before the applicant's name is disclosed.

Transfer pricing in general, and business restructuring and FAR transfer in particular, has probably been the "hottest" issue in recent years in the Israeli tax sphere. It is the subject matter of numerous appeals pending before the ITA and the courts, and of a few MAP procedures. Permanent establishment matters are expected to become more common.

No fees need to be paid to the ITA to litigate at the administrative level.

The fee for filing a tax appeal to the District Court is ILS910 and, to the Supreme Court, is ILS3,016, regardless of the amount of tax in dispute or the number of tax years that are the subject of the appeal. The fee for an "additional review" by the Supreme Court regarding novel and unique legal matters (after the Supreme Court has already rendered a ruling in the appeal) is ILS1,012. Court fees are paid by the appellant at the time of the submission of the appeal. The appellant may request an exemption from payment due to financial difficulties. Certain requests that are filed to court within the appeal require payment of fees in negligible amounts.

Court fees are generally not refundable. However, within the final rulings, the court orders the unsuccessful party to reimburse the other party for court fees and litigation costs (usually such reimbursement amounts are lower than the actual litigation costs).

Other than litigation costs and repayment of any tax paid in excess (with interest and linkage differentials), the taxpayer is not entitled to any compensation or an indemnity even if a court decides that the ITA's tax assessment is null and void.

No fees are required for the exercise of the procedure before the Attorney General for controversies relating to government entities.

No public statistics are available.

No public statistics are available.

No public statistics are available. A few privately held studies have shown that in the majority of court cases (65%–85%), the rulings are in favour of the ITA.

The key strategic guidelines to consider in a tax controversy are as follows:

  • Build a team, legal and tax, to handle the case from the first stages of the audit.
  • Co-operate – non-co-operation with the ITA can reduce the chances of reaching a fair settlement and can act against the taxpayer in court.
  • Maintain a written record of all the communications with the ITA.
  • Insist on every procedural and material right; raise all arguments, including procedural and as to the merits (to support your case and against the ITA); and ensure that all supporting materials are provided and prepared (including expert opinions and transfer pricing studies).
  • If possible, do not pay the tax in dispute (but note that any outstanding tax bears interest and linkage differentials). Where tax in excess was paid, consider whether a refund is possible.
  • Consider whether involvement of other non-Israeli tax authorities is possible and desirable.
  • Consider the overall implications of the matter, including on the taxpayer’s ongoing operations, any related parties, the shareholders, other tax issues (including with respect to any other taxes), future tax years, and civil and criminal implications.
  • Consider if "shifting the pressure" on to the ITA is possible.
  • Fight vigorously but at the same time put in place channels for a settlement.
  • Try to leverage a settlement to gain certainty for future tax years.
  • Not every battle is worth fighting – consider the amounts involved and the additional matters that may arise during a tax controversy.
Herzog Fox & Neeman

Asia House
4 Weizmann St.
Tel Aviv 6423904

+972 3 692 2035

+972 3 696 6464
Author Business Card

Trends and Developments


Meitar Law Offices has a tax group which includes 22 lawyers, with significant experience in US and other tax systems. The team is recognised for its excellence and professionalism in representing clients in all tax areas, from advanced planning to the implementation of tax rulings and controversies. Meitar represents multinational and Israeli taxpayers in complex tax and transfer pricing controversies in front of the tax authorities and in court; structures international transactions, including tax-free reorganisations, complex financing transactions and equity and debt offerings; plans and implements inter-company strategies and restructurings, including intangibles, financing and supply chain; advises on the formation and structure of private-equity funds, VCs, hedge funds and real-estate funds as well as representing the VC industry in various matters; advises high net worth families (usually with a multi-jurisdictional presence) on all aspects of intergenerational wealth transfers; and advises on inbound and outbound structures for investments in real estate.

Transfer Pricing Controversy in Israel

Multinational enterprises (MNEs) have been involved in a significant and ever-growing portion of large-scale tax controversies in Israel in recent years, often relating to transfer pricing (TP) issues. Perhaps the most litigated TP issue are the tax aspects of a change in the business model made by an MNE. The matter usually comes up where an Israeli-based company (Target) is acquired by an MNE, and consequently transfers (or is deemed to have transferred) its intellectual property (IP) to other entities of the MNE, or where the MNE otherwise integrates the Target in a manner that raises issues of transfer of functions, assets and risks (FAR) to related entities. Israel has seen important legal precedents in this area in recent years, as well as Circulars published by the Israeli Tax Authority (ITA) providing its interpretation of Chapter 9 of the OECD Guidelines on TP. These should be carefully considered by MNEs when planning post-acquisition integration so as to avoid potential double tax on income that may not be symmetrically adjusted in the countries of the relevant related companies. Careful planning, structuring, pricing and documenting in real time may prove extremely useful if and when the ITA challenges the taxpayer's pricing and reporting positions. 

Gteko v Tax Assessor of Kfar Sava (TA 49444-01-13) (the "Gteko Case")

In June 2017, the District Court issued its opinion in the Gteko Case. The issue before the court was whether an Israeli company could, soon after being acquired by a foreign company, transfer its IP and claim that the value of that IP should be determined as a stand-alone asset, valued at a sum significantly lower than the price at which the foreign company acquired the Israeli company's stock. The case was very significant since it was the first judicial review of the ITA's position (published in July 2010) with respect to “a change in the business model” of a technology company following its acquisition.

The court ruled in favour of the ITA holding that the transferred assets comprised more than just the IP and the value of the transferred assets should be determined by reference to the acquisition price of the selling company. As will be demonstrated below, the court's decision relied heavily on the particular facts and circumstances in question and, in particular, on the way the Israeli company had managed its post-acquisition integration.

In November 2006, Microsoft acquired 100% of the stock of Gteko Ltd (Gteko) for USD90 million with the goal of integrating Gteko's technology into Microsoft’s products in order to achieve certain synergies. Gteko was an Israeli company that developed software used as a platform for building software solutions. Gteko employed about 150 people, the majority of whom provided customer service and a smaller percentage of whom engaged in R&D. Shortly after Microsoft's acquisition, all of Gteko employees ceased working for Gteko and became employees of Microsoft Israel (MS Israel), an Israeli subsidiary of Microsoft. Concurrently, Gteko and MS Israel entered into an inter-company services agreement, on a cost-plus basis, for MS Israel to provide workforce services to Gteko (so that Gteko could continue providing customer service to its existing customers). Less than a year afterwards, in accordance with its global IP policies, Microsoft acquired Gteko’s IP from Gteko in an asset transaction for a stated fair market value consideration of USD26 million. The consideration was based on a purchase price allocation (PPA) conducted in connection with the stock acquisition of November 2006.

We note that the facts here differ from the "typical" controversy encountered by Israeli companies (especially in the hi‐tech sector) acquired by MNEs. In most cases, the employees remain with the Israeli target and the dispute with the ITA is over whether the transfer of IP is in fact a transfer of additional FAR and how to value the transferred assets.

The ITA successfully argued that Gteko’s assets could not have “evaporated” and that the transfer of Gteko’s assets and workforce left Gteko as an empty corporate shell with no economic substance. Therefore, the asset transaction should be treated as a sale of the entire business. The ITA's position was heavily supported by the fact that all of the R&D resources that were transferred from Gteko were diverted towards the development of a new Microsoft product, as had been the original purpose of Gteko’s acquisition. Further, the evidence supported the conclusion that, without the Gteko workforce, its legacy IP had almost no value. Therefore, while employees cannot be “sold,” the court treated Gteko’s "workforce in place" as an asset of Gteko, attributing great economic value to it (about 30% of Gteko's acquisition price).

The case raised several more issues. First, the court discussed whether part of the acquisition price paid by Microsoft was for “synergies” and should thus be neutralised when applying the acquisition price method. The court ruled that in order for the synergy value not to be attributed to the Target, it is not sufficient to prove "a synergy" to the acquiring company, but rather to prove such synergy would not exist for other purchasers. Second, the court applied TP principles even though the transfer of employees was between two Israeli companies with a common foreign owner. Third, the analysis and position of the ITA, to a great extent, relied on internal documentation of Microsoft prior to the acquisition, which MNEs should carefully account for in real-time.

Circular 15/2018 - a change in the business structure in MNEs (the "Circular")

Leveraging the Gteko ruling, in November 2018 the ITA published a detailed circular setting forth its position regarding the identification and characterisation of potential business model changes (business restructurings). The Circular, replacing the earlier 2010 ITA Circular, also covers valuation methodologies, detailed documentation requirements, and the tax consequences of alleged changes.

The Circular starts by stating that a change in the business model usually occurs when the FAR of an entity are transferred or terminated. According to the Circular, inter-company agreements are a starting point for the FAR analysis but are not necessarily a decisive factor. The Circular emphasises that when either: (i) such agreements are not in writing; or (ii) the facts and circumstances of the case, including the parties' de-facto conduct, materially deviate from the agreements, then the de-facto circumstances shall prevail and the analysis should follow the facts, with the result that the transfer (or lack thereof) of legal ownership may not be conclusive of the TP consequences. ¬Regarding inter-company transactions involving IP, the Circular further distinguishes between a sale, resulting in a capital gain event, and a grant of a licence, or other types of grants of a right to use IP, resulting in ongoing income. Here, too, the ITA emphasises the "substance over form" approach, allowing limited significance to some parameters controlled by the MNE, such as the "definition" the parties gave to their legal arrangement and "the form of payment" (lump sum or recurring fee), etc. Instead, the Circular provides several factors for determining the character of the transaction, mainly seeking to clarify which entity de-facto controls and assumes the risks and rewards in connection with the transferred IP.

The Circular also provides detailed guidelines for the "appropriate" valuation methods for the transferred FAR. The ITA prefers the acquisition price method where an acquisition transaction precedes the transfer of FAR. The Circular allows for some adjustments, primarily a shift from equity value to enterprise value (being the FAR in the ITA's opinion) by deducting the financial debt, net, as well as adjustments relating to the passage of time and changes in economic circumstances. However, the ITA disallows a taxpayer from allocating any value to synergies, control premium, or taking into account liquidity considerations. The Circular requires that all cash, cash equivalents and rights received (definitive or contingent) must be taken into account as part of the acquisition price.

The Circular also lists several other guidelines regarding the valuation process (including guidance for determining the discount rate). Most notably, a PPA performed by an acquirer may not be relied upon for value allocation (as in the Gteko Case), and goodwill or going concern may not be separated from other assets (consistent with a recent Supreme Court ruling). However, value should be allocated to workforce in place where appropriate (as in the Gteko Case).

Moreover, the Circular requires secondary adjustments, widely used by the ITA in TP cases, such that any additional income due to TP adjustments triggers a deemed (grossed up) dividend or loan transaction with the foreign related entity. Finally, yet importantly, the Circular lists the documents that the ITA will require in an audit of a change of a business structure (despite the questionable legal authority for requiring such documents).

While ITA Circulars present the position of the ITA and carry weight as a professional source worth considering in any tax controversy and establishing market practice, they are not legally binding on taxpayers or the courts. Our view is that the Circular deviates from the OECD TP Guidelines and the law. The ITA is considered by many as an "aggressive" and opportunistic taxing authority. During times of economic turbulence when governments have a greater need to increase their tax revenues, such as the current crisis unfolding due to the Coronavirus pandemic, we would expect the ITA to pursue aggressive positions. Therefore, an MNE preparing an acquisition of an Israeli Target should bear this list in mind. 

Broadcom Semiconductor Ltd V Tax Assessor of Kfar Sava (TA 26342-01-16) (the "Broadcom Case")

Following the Gteko Case and the Circular, the ITA aggressively applied the underlying principles in numerous tax audits and controversies. However, in December 2019, the same judge who decided the Gteko Case, ruled against the ITA in the Broadcom Case. In his decision, the judge's explanations of the differences between the two cases are particularly insightful. The main takeaway from the opinion is that each case should be analysed according to its specific facts and circumstances. The court rejected the prevailing ITA approach that a change in TP strategy following the acquisition of an Israeli Target is automatically a business restructuring, resulting in a capital gain event. Importantly, the ITA did not appeal this ruling, probably because the ITA believed that the Supreme Court would not overturn the many factual determinations made by the District Court.

The facts of the Broadcom Case materially differ from the Gteko Case. In Broadcom, the appellant was an Israeli company (Appellant) established in 2001 as a subsidiary of a US parent corporation (Parent). The Appellant developed, manufactured and supplied components for routers and fast switches. In 2002, it entered into a licence agreement with the Parent under which the Parent granted the Appellant the right to use certain IP in exchange for royalties. It was agreed that any IP developed until the date of the agreement would be owned by the Parent, while IP developed afterwards by the Appellant would be owned by it. In addition, both entered into a licence agreement with an unrelated third party for a joint development of the Appellant's IP. This agreement resulted in earmarking of the Appellant's IP years prior to the Broadcom acquisition (described below).

In 2009, Broadcom Corporation (the Broadcom Group), a US publicly traded corporation, acquired the Parent for approximately USD200 million. The Broadcom Group put in place three inter-company agreements, under which the Appellant would provide certain services, and a licence to use IP to the Broadcom Group, as follows: (i) a marketing services agreement on a cost-plus 10% basis; (ii) an R&D services agreement on a cost-plus 8% basis; and (iii) a licence agreement with Broadcom Cayman, a Cayman company within the Broadcom Group, permitting Broadcom Cayman to use, develop, design, distribute and sell products that included the Appellant’s IP rights for five years, in consideration for royalties at the rate of between 14.1% and 14.7% of Broadcom Cayman’s sales turnover (agreements are referred to as the Transaction). At the end of the five-year term of the licence, the Appellant sold its IP for USD73 million to an unrelated party. Importantly, following the acquisition by the Broadcom Group, the Appellant gradually increased the number of its employees, as well as its revenues and profits.

The main issue before the court was whether the Transaction constituted a business restructuring in which the FAR of the Appellant were de-facto sold to entities within Broadcom Group. The ITA applied its "traditional" position and argued that the Transaction had significantly reduced the appellant’s business operation and profit potential by reducing it to a mere R&D service provider for affiliated companies and therefore should be deemed a sale. The ITA assessed the deemed sale of the FAR as equal to the acquisition price and added the tax liability deriving from the secondary adjustment. The Appellant argued that the Transaction reflected real transactions and was not a sale of any FAR. In support of that conclusion, the Appellant emphasised the increase in revenues, profits and employees, as well as the significant consideration from the subsequent IP sale to the unrelated party.

The Court emphasised that each case should be examined on its own specific facts and merits. Changes in risks and potential rewards do not automatically mean that a transfer of economic value occurred. In the words of the court: "I do not consider the words 'change of business model' to be some kind of magic words the expression of which is enough to change the classification of the transaction between the parties." The question to consider is whether business model changes might occur under the same arm's length conditions between unrelated parties while receiving adequate compensation. The court emphasised several times that, as in the Gteko Case, it gave significant weight to the outcome of the business model change using hindsight. The classification of the business restructuring should be examined in light of what actually happened after the transaction.

Regarding the FAR analysis, the court stated that the fact that the Appellant conducted R&D activity for itself prior to the change and as a contractor for an affiliate after the change did not mean that the function was transferred. In so doing, the court emphasised the importance of any change in the number of employees in this context. The court also reviewed the changes in risks, and made the point that the Appellant assumed new risks following the business restructuring, such as having only one customer and becoming dependent on the sales by Broadcom Cayman as a licensee. It further noted that reducing risks could be done for business reasons. The court stated that reducing risks (and prospects) in anticipation of an eventual increase in revenue and profits is not a transfer of FAR that should be classified as a "sale" of an "asset". However, the court did acknowledge that a transfer of FAR could be a transfer of an asset for tax purposes (defined as anything of economic value), and each case should be examined on its facts.

As in the Circular, the court held that inter-company agreements and the conduct of the parties are the starting point of any TP analysis. Unlike the Circular, however, the court ruled that interference in the contractual arrangements should only happen in rare cases. The Court also criticised the ITA for ignoring possible double taxation that could result from the proposed reclassification. The court mentioned that the ITA may, naturally, challenge the inter-company agreements in such cases as to whether they provided for arm's length consideration (an option the ITA neglected to, or chose not to, raise in the Broadcom Case).

The court acknowledged the possibility of splitting IP between legacy IP and new IP developed under a licence agreement and owned by the licensee. Importantly, the fact that the licensee was a Cayman company, residing in a tax haven, did not taint the licence agreement or the substantive discussion. The court repeated that the specific circumstances must be examined in each case and gave weight to the fact that the old IP was eventually sold later for a significant amount.

The court explained that the doctrines of "reclassification" or a "change in classification" (commonly used by the ITA in many contexts) may be applied, to a transaction for tax purposes, differently than under contract or corporate laws. A change in classification may be made by reference to a FAR analysis, but the Court emphasised that it should not be done automatically or too broadly, but rather with restraint.

The court reaffirmed its holding in Gteko and accepted the ITA’s position that the burden of proof remains with the taxpayer to prove the real transaction that took place. This is consistent with recent Supreme Court rulings.

The court stated that the ITA may apply the OECD Guidelines and the FAR analysis that are consistent with Israeli tax principles and are relevant for cross-border transactions. The court held that these may be applied even for transactions that took place prior to the adoption of the relevant chapters in the OECD Guidelines, and even where the foreign party to the transaction is not a resident of an OECD country.

In obiter dicta, the court reasserted its previous holding that the PPA is not a suitable tool to determine an arm's length price, since it is prepared for accounting purposes and does not necessarily reflect the value of the FAR. Nevertheless, in the absence of other documentation, the PPA may serve as an indication of how both the seller and buyer considered the business potential. In addition, the court held that a control premium should be applied to reduce the acquisition price (even if 100% of the company is acquired), but real time evidence that the acquirer took such premium into account is required.

The takeaway

Israel is a source for innovation. Many Israeli companies are potential targets for prospective acquisitions. The recent Broadcom Case demonstrates that contemplated post-acquisition integration should be carefully planned, structured, priced and documented at the pre-acquisition stage, taking into consideration the principles described herein in anticipation of a possible controversy with the ITA. The court's emphasis on the specific facts and circumstances of each case, clearly incentivises a thorough pre-emptive analysis of post-acquisition TP strategies.

Positioning towards tax controversy is best handled by setting the facts and strategies as would be viewed by the court in hindsight, being the litigation in our case. Such advice, true to any tax controversy, is even more critical with regards to complex TP situations.     

Meitar Law Offices

16 Abba Hillel St.
Ramat Gan

+972 3 610 3941
Author Business Card

Law and Practice


Herzog Fox & Neeman has a tax department comprised of 45 members (including 15 partners), of whom nine are also Certified Public Accountants, ten studied in leading universities outside Israel and five have held senior positions at the Israel Tax Authority (ITA). HFN has acted in tax litigation and tax disputes before the ITA and Israeli courts, and in mutual agreement procedures (competent authority). Over the past year HFN has represented: multinational technology groups in Israeli and cross-border tax disputes, including regarding transfer pricing and business-restructuring matters; one of the largest US global asset management firms in a dispute concerning its Israeli investments and sale of shares; a US digital corporation and its group entities in an income tax audit and a value-added tax audit; an Asian conglomerate in a tax dispute concerning its Israeli sales activity; and a US high net worth individual with respect to a tax audit commenced by the ITA regarding taxation of S corporations.

Trends and Development


Meitar Law Offices has a tax group which includes 22 lawyers, with significant experience in US and other tax systems. The team is recognised for its excellence and professionalism in representing clients in all tax areas, from advanced planning to the implementation of tax rulings and controversies. Meitar represents multinational and Israeli taxpayers in complex tax and transfer pricing controversies in front of the tax authorities and in court; structures international transactions, including tax-free reorganisations, complex financing transactions and equity and debt offerings; plans and implements inter-company strategies and restructurings, including intangibles, financing and supply chain; advises on the formation and structure of private-equity funds, VCs, hedge funds and real-estate funds as well as representing the VC industry in various matters; advises high net worth families (usually with a multi-jurisdictional presence) on all aspects of intergenerational wealth transfers; and advises on inbound and outbound structures for investments in real estate.

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