Corporate - Significant developments

Last reviewed - 30 June 2023

In December, 2022, the Israeli Tax Authority updated the transfer pricing form which is submitted annually within the tax return of an Israeli taxpayer reporting each inter-company transaction. This form includes  requirements to disclose whether or not the company is following local safe harbor rules relevant to certain activities, and a new disclosure as to whether  the company has local compliant transfer pricing documentation for the reported related party transaction.  As each form needs to be signed by the taxpayer, companies will need to carefully consider their local Israeli documentation compliance in respect to this increased disclosure within the corporate tax return.

In 2022, Israeli transfer pricing legislation has been amended to include two new sections adding the requirement for a Country-by-Country (CBC) report and setting the legal foundation for a Master File requirement. With both of these amendments, Israel has now joined the many countries that have formally adopted requirements aligned with Action 13 of the OECD Base Erosion and Profit Shifting (BEPS) initiative and as detailed within Chapter V of the OECD Guidelines.

As these documentation obligations represent a new requirement for transfer pricing purposes under Israeli tax law, multinational groups should assess their practical impact and take steps to be compliant.