Israel: Parliament approves amendments to Tax Ordinance and Transfer Pricing Regulation to be effective from July 5, 2022
The Israeli Parliament enacted the amendments to the Israeli Tax Ordinance (the “Ordinance”) and the Israeli transfer pricing regulations (the “Regulations”) to introduce 3-tiered transfer pricing documentation requirement under BEPS:
- Country By Country Reporting (“CBCR”): The CBCR shall be applicable to MNE groups with consolidated revenue of ILS 3.4 billion or more.
- Submission of TP Documentation Study (local file): The timelines to submit the transfer documentation has been revised to 30 days from 60 days upon request by Tax authority. The entity needs to also provide the additional details such as Group / Company structure, details of senior officials with their location details, a list of competitors, description of the main service agreements, etc.
- Submission of Master File: The Master File requirement threshold is consolidated turnover in excess of ILS 150 million and it would apply to the Israeli parent or Israeli entity which is part of MNE Group is not subject to Master file submission requirement in parent entity’s jurisdiction.
Master File and CBCR requirements are relevant for the year 2022 documentation which needs to be prepared in 2023. For determining applicability of turnover thresholds for the year 2022 documentation, one needs to look at turnover of 2021.
Companies subject to transfer pricing provisions should assess the new requirement and prepare their systems to meet compliance requirement.