Our firm specializes in tax consultancy and planning for individuals and companies, as well as international tax planning, tailored to each client’s needs. The firm’s staff includes partners and lawyers with tax planning expertise, skilled in identifying and compiling optimal tax solutions leveraged to shape efficient tax frameworks which reduce tax liabilities.
Tax Consultancy & Planning
Tax laws tend to be extremely complex and somewhat unclear. This makes it difficult for an individual or business owner not well-versed with their intricacies to plan for taxation. In addition, embedded in tax laws are various professional terminologies and general guidelines. Their implementation is subject to the manner in which they are interpreted in a court of law and frequently varies.
In addition to proficiency in these laws and ordinances, tax consulting requires attention to details, skill and creativity in order to structure an efficient and economical tax structure, specifically customized to the needs of each client, and prevent tax liability to the possible extent.
Legitimate Tax Planning
The right of every taxpayer to plan taxation is acknowledged by most tax methods worldwide, including within the Israeli tax system. This right was even recognized as legitimate by the Supreme Court Justice Meir Shamgar, who stated that:
“[…]the mere fact that parties chose a low-tax legal structure does not indicate that the structure is artificial or fictitious. It is the right, and even duty, of tax experts to plan legal transactions towards ensuring there are no tax petitions.”
Another example of the Supreme Court’s acknowledgment of this matter is the verdict in the matter of Promedico, where the Supreme Court Justice (Ret.) Ayala Procaccia differentiated between “tax avoidance” which is forbidden by the law, and “legitimate tax planning.” Both cases revolved around reducing tax, but the difference hinged on the method.
Tax Planning for Corporations and Individuals
Businesses in Israel are required to report on their incomes to three primary authorities: Bituach Leumi, Income Tax, and VAT (Value Added Tax).
Bituach Leumi collects fixed percentages based on three parameters: in accordance with actual income reports, via a statement on anticipated income and collection of advances, and implementation of further calculation carried out at the end of the tax year.
The Income Tax Authority uses a similar method, although the tax calculation is far more complex and based on gradual tax brackets, which involve numerous additional aspects such as the taxpayer’s individual and family status, place of residence, gender, parenting status, and other parameters.
VAT is in fact not collected from the business owner. Rather, it is included in the payment collected from customers for products or services rendered. The business owner transfers this sum according to a bi-monthly statement provided to the authorities. Businesses earning less than NIS. 100,000 annually and holding exemption documents do not pay this tax. However, exemption from having to pay VAT does not exempt the business owner from submitting an annual income report.
Advance tax planning can significantly reduce the costs a business must cover, but requires analyzing all expenditure and tax benefits based on relevant parameters, realizing rights and entitlements, and submitting precise reports to the tax authority in a timely manner.
Our firm provides tax consultancy to individuals and companies on all areas of taxation relevant to their activities. We also provide clients with ongoing support on arrangements with tax authorities (pre-ruling), and represent clients in tax controversy matters and tax appeals against the tax authorities, the various court instances, including the Supreme Court, as needed.ואם נדרש אף מייצג אותם בבתי המשפט בערעורי מס מול רשויות המס ובפני הערכאות השונות של בתי המשפט, לרבות בבית המשפט העליון.
Optimal tax planning and consultancy should be performed based on a long-term approach, and take into account all future taxes which may apply to a specific transaction and upon additional resulting transactions. Our law firm’s experience in the field of tax planning enables us to customize up a tax strategy for each client.
When planning a tax strategy, all relevant taxes and other components of international tax must be taken into account. On occasion, further examination may reveal that the transaction is not viable.
A professional and high-quality tax consulting firm is able to choose the optimal transaction with respect to tax payments by remaining up to date on the most recent tax laws and rulings. Correct and optimal tax planning must take into account both types of tax plans, as well as the taxpayer’s future transactions.
Advance legal actions are sometimes required before implementing a transaction in order to reduce tax liability: for example, there may be value in registering as an authorized business before carrying out a specific transaction, in order to benefit from inputs tax deductions; another option to consider is the establishment of a corporation, which will acquire the asset, thus enabling the taxpayer to benefit from corporate tax rates.
International Tax Planning
Our firm provides private clients and companies in Israel and abroad with legal services related to international tax planning. We assist our clients in planning their international taxes on their operations conducted in Israel and abroad, taking into consideration taxation charters and tax havens.
The tax method in Israel is personal: an Israeli resident whose life is centered in Israel must report and pay taxes on the overall income earned both in Israel and abroad. It is important to keep in mind that an Israeli resident who paid foreign taxes on income sourced outside Israel but which is taxable in Israel will be entitled to credit for those taxes.
Israeli law enables an Israeli, even if living permanently in Israel, to establish international companies which can be managed outside Israel and generate income for which the Israeli will not be required to pay tax in Israel. Even when these companies operate and conduct bank accounts abroad, as long as they are conducted transparently and on the basis of business and economic logic, and as long as those activities are conducted outside Israel, the companies are not required to pay taxes in Israel. We do emphasize that such international companies will be subject to the tax laws of the country in which they operate.
Israel is signed on to all 50 charters preventing dual taxation. These are agreements reached among countries relating to tax. If the tax rate in a foreign country in which the company activity is conducted is identical and/or higher than the rate in Israel, the Israeli company owner does not gain any tax advantages.
This is precisely the point where international tax consultancy is manifested. The advising lawyer must be fully versed with the details of these dual taxation charters, must have in-depth knowledge on issues relating to income (exemptions and non-exempt), and be up to date on tax ordinances relating to income deductions and offsetting losses. The consulting lawyer must also be familiar with Israeli and international banking institutions, and understand the enterprise being considered by the client: for example, is a service or sale being conducted, is only one country involved or more than one, where should the management and operations systems be located, and so on.
Our firm provides personalized, professional tax consultancy based on our vast experience in the multiple aspects of taxation and our close familiarity with the business community’s needs.
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Our firm advises and provides ongoing legal support for companies and corporations, officers and shareholders, on all legal and commercial issues relating to the company’s activities, from the stage of incorporation and throughout the company’s lifecycle and growth.