3 April 2020

Global Tax Alert

Israel defers periods for

certain tax procedures
in response to
COVID-19; additional
tax relief published

On 27 March 2020, the Israeli Government approved emergency regulations

(the Regulations) that define the period between 22 March to 31 May 2020
EY Tax News Update: Global
(the Defined Period) as a period that will not be taken into account for the
Edition periods under the relevant tax sections listed in the Regulations (income tax,
EY’s Tax News Update: Global withholding tax, value-added tax and others), if the end of such periods falls
Edition is a free, personalized email within the Defined Period or two months thereafter.
subscription service that allows
It is noted that most of the listed sections are relevant for decisions and
you to receive EY Global Tax Alerts,
announcements that should be made by the Israeli Tax Authority (ITA) rather
newsletters, events, and thought
than by the taxpayer.
leadership published across all areas
of tax. Access more information The following is a non-exhaustive list of the main income tax and withholding
about the tool and registration here. tax (WHT) procedures that have been postponed by the Regulations:
• Income tax statute of limitations period – the approval of the taxpayer’s
Also available is our EY Global Tax self-assessment or the assessment by the ITA should be given within four
Alert Library on ey.com. years from the end of the tax year in which the tax return was filed. This
deferral is mainly relevant for taxpayers with a special tax year (i.e., that is
not based on a calendar year).
• Application for re-examination of a books-disqualification decision – the
application should be made within 30 days from the decision date.
• The authority of the ITA Director to review and correct an income tax
assessment.
2 Global Tax Alert

• WHT statute of limitations period – should be the latest to qualify for the Israeli IP box regime, if they establish
of: (i) the income tax statute of limitations period for the an innovation level that is similar to or higher than the
relevant tax year; or (ii) four years from the end of the innovation level that is acceptable worldwide in the main
tax year in which the taxpayer’s annual WHT return was technological field of the company.
submitted.
• Filing of appeal on an income tax and WHT assessments Other tax measures and relief
received – should be filed within 30 days from the day of
ITA approval on stock-based compensation deposits
an income tax assessment, and two weeks from the day of
with a trustee under Section 102 of the ITO. Whereas
a WHT assessment.
in order to be eligible for the capital gains tax track under
• The decision of the ITA Director on a transfer pricing Section 102, it is required, among others, to deposit the
ruling – should be received within 120 days (or 180 if signed grant letters with a trustee within 90 days, the ITA
extended by the ITA Director) from the application date. approved a relief that allows that deferral of such deposit
• The ITA’s approval on a grant plan and/or a trustee for until 1 May 2020 (where on that date, the ITA may re-
stock-based compensation grants under Section 102 examine the economic developments and update the
of the Income Tax Ordinance (ITO) – should be received deferred period accordingly). It should be emphasized,
within 90 days of filing. however, that the Board of Directors’ decision approving the
grants and the grants detailed database are required to be
• A decision that a merger plan meets the relevant
deposited on time, as required in the ITA guidance.
conditions for a tax-free reorganization – should be
received within 90 days (or 180 if extended by the ITA Input VAT offset relief. In general, a VAT dealer is entitled
Director) from the application date. to offset input VAT only when he has an original or digitally
• A decision on the denial of tax benefits of a merger – signed tax invoice produced in accordance with the relevant
should be given within four years from the end of the tax bookkeeping rules.
year in which the relevant tax return was filed. In light of the COVID-19 crisis and the existing restrictions
The following is a non-exhaustive list of the main value- on businesses, the VAT authorities published a lenient VAT
added tax (VAT) procedures that have been postponed by ruling (no. 6782/20), which allows a supplier to send a copy
the Regulations: of a scanned tax invoice by e-mail, without a digital signature,
whereas at the same time, he will send the original copy of
• VAT statute of limitations period – should be 5 or 10 years
the tax invoice as a hard copy. The tax invoice recipient will
from the return filing.
record the said invoice in his bookkeeping records and may
• Filing of VAT appeal – should be filed within 30 days from offset the input VAT based on the invoice sent by e-mail
the day of the VAT assessment receipt, unless the VAT without a digital signature. Additional conditions are listed
authority Director extended such period. in the ruling.
• Statute of limitations of a VAT appeal – if the VAT Relief for Grants-Track Enterprises (for manufacturing
authority Director does not provide his decision within a equipment, buildings and fixed assets). The Investment
year from the appeal filing, it is considered as accepted. Authority of the Ministry of Economy and Industry has
• Response from the VAT authority Director on various issued a procedure that stipulates administrative relief for
registration requests – if a response is not received within investment programs under the Grants-Track. The following
90 days from filing of the request, it is considered that the are the main leniencies included:
Director denied the request. • Extension of the performance period of approved programs
The Regulations also refer to other tax laws, such as the from two to five years, with respect to active approval
Customs Ordinance, the Real Estate Tax Law, the Capital letters, as well as for approval letters to be issued in 2020.
Investment Encouragement Law, and others. • No application will be required to extend the date of
implementation of the approved program until the end
It is noted that the Defined Period also defers the 90-day
of the fifth year.
period following a tax year in which innovative companies
can apply to the Israeli Innovation Authority in order
 Global Tax Alert 3

• This relief will also apply to pending applications for • The administration’s discretion will be expanded to confirm
extension of the performance period of up to five years, that the objectives have been reached for companies that
provided that five years have not yet elapsed since the have reached 70% of the objectives and met the threshold
date of the program’s approval. of a “Competitive Enterprise.”
• A company that reported on the performance of 100% of • The Administration’s discretion will be expanded to consider
the approved investments will be required to submit a final partial reimbursement of benefits, and additional “COVID-19
performance report within three months of the completion Impact” consideration will be added.
of the investments.
Other leniencies are included in the procedure.

For additional information with respect to this Alert, please contact the following:

EY Israel, Tel Aviv

• Sharon Shulman [email protected]
• Lior Harary-Nitzan [email protected]

Ernst & Young LLP (United States), Israel Tax Desk, New York
• Lital Haber [email protected]
EY | Assurance | Tax | Transactions | Advisory

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