The Convention for the avoidance of double taxation and the prevention of fiscal evasion concluded between Romania and Israel

By: Eli Doron, Adv; Yaron Tikotzky, Adv, (C.P.A); Dr.Slomo Nass, Adv, (C.P.A)

1/1/1900

Romania and Israel have concluded on June 15, 1997, the Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.
The Convention applies to persons who are residents (subject to imposition) of one or both of the Contracting States, respectively to individuals, companies and other association.
The Convention refers to the taxes on income, imposed on behalf of a Contracting State, irrespective of the manner in which they are levied. Specifically, the Convention is applied to the existing taxes, respectively:

a) In the case of Romania:
(i) tax on income derived by individuals;
(ii) tax on profits of bodies and legal persons
(iii) tax on salaries, wages and other similar remuneration;
(iv) tax on dividends.

b) In the case of Israel:
(i) Taxes imposed in accordance with the Income Tax Ordinance and its adjunct laws (except the tax on capital gains)

The Convention refers to the following categories of income:

1.) Income from immovable property;
2.) Business profits;
3.) Transport enterprises;
4.) Associated enterprises;
5.) Dividends;
6.) Interests;
7.) Royalties;
8.) Capital gains;
9.) Independent personal services;
10.) Dependent personal services;
11.) Director’s fee;
12.) Artists and sportsmen;
13.) Pensions;
14.) Government service;
15.) Professors and researchers;
16.) Students and trainees
17.) Other income

As an exception to the Convention, the Signing States agreed on the limitation of benefits. It was agreed that the competent authority of a Contracting State, after consultation with the competent authority of the other Contracting State, may refuse the benefits of the Convention to any person, or with respect to any transaction, if in its opinion the granting of those benefits would be abusive to the Convention, exceeding its purposes.

The Convention stipulates the following methods to eliminate double taxation:
 

1. The taxes paid by the Romanian residents in respect on income or capital taxable in Israel, shall be deducted from the Romanian taxes due according to the Romanian fiscal laws.
   Such deduction shall not, however, exceed the part of the income tax or capital tax, as calclated before the deduction is given, which is attributable to the income or the capital which may be taxed in the other State.
    
2. Subject to the laws of Israe regarding the allowance as a credit against Israel tax of tax paid in any other country than Israel, Romanian tax paid in respect of income derived from Romania shall be allowed as a credit against Israel tax payable in respect of that income. The credit shall not, however, exceed that portion of Israel tax which the income from sources within Romania bears to the entire income subject to Israel tax.

The Convention also refers to the possibility of amicable settlement, in case a person considers that it was injured as a result of taxation which is not in accordance with the Convention.