Reportable Tax Positions 2022

The Israeli Tax Authority (ITA) published more reportable tax positions on December 28, which are similar to reportable tax shelters in the US and UK. But the ITA also uses them to impose its interpretation of the tax law in non-tax shelter cases.

The latest batch relates to the 2022 tax year onwards and take aim at controlled foreign companies (CFCs) among others.

What are Reportable Tax Positions?

A reportable income tax position is a position contrary to a position published by the ITA if the tax advantage exceeds NIS 5 million in the tax year or NIS 10 million over 4 years.

No reporting is needed from certain Israeli charities, nor from individuals or companies with income below NIS 3 million or capital gains below NIS 1.5 million in the tax year.

Reportable income tax positions must be reported within 60 days after filing the main annual income tax return.

If your tax planning is at odds with an ITA position, you must tell them on Form 146, so they know where to start a tax audit. If you don’t manage to reach agreement with the ITA regarding such a position, you decide whether to accept theirs or go to court.

Below we overview some 2022 positions.

CFC Dividends

A CFC is essentially a passive foreign company over 50% (sometimes over 40%) owned by Israeli residents that pays 15% foreign tax or less. Israeli residents holding 10% or more of the CFC must generally pay Israeli tax of 30%-33% on deemed dividends if the CFC has unpaid (i.e. undistributed) profits. Additional detailed rules apply.

Reportable position 110/2022 says a taxpayer may not offset an actual dividend of one CFC against a previously taxed deemed dividend of another CFC. However, a dividend attributed to shareholders from the profits of a specific indirectly held CFC will be considered a dividend from that specific CFC. Comment: This seems to necessitate year-by-year tracking of profits of a group of CFCs.

Reportable position 111/2022 says that the calculations of income, profits and passive an income of a CFC should also include exempt passive income including not only interest, rental and royalty etc income, not only exempt dividends or capital gains. Rather a lot of “not only”s. If only the ITA would say what else they want and why?

Reportable position 112/2022 deals with foreign professional companies (FPC). In brief, an FPC is a foreign service company owned 75% or more by Israeli residents, and Israeli residents holding 10% or more of the CFC must pay tax on deemed dividends, subject to various additional rules. This reportable position says that foreign taxes paid by an Israeli resident shareholder in an FPC may not be offset against “the tax” applicable to the FPC except where the Israeli tax law does allow it. These are complex rules and again it is not too clear what the ITA wants or why.

Reportable position 113/2022 says that an Israeli parent company may credit underlying corporate income tax of foreign subsidiary companies, per detailed rules in the Israeli tax law, only if the income distributed are “dividends” from business profits, dividends or interest, as opposed to capital gains from a liquidation. This is controversial as it appears to rule out a foreign tax credit for foreign corporate income tax on liquidation dividends – unlike other countries.

VAT reportable tax position 14/2022 seeks to close down a loophole regarding businesses that purchase Israeli homes from people not in business (and not a charity or financial institution). The VAT Law Section 5(b) says that when selling the home, the business may only need to pay 17% VAT on the difference between the purchase and sale price. The reportable position says that VAT should apply to the full sale price, not just the difference, if the purchase involves demolition of the home and sale of land or a new home by the business.


This year’s reportable positions are very brief and it is not always easy to know what the ITA wants. In 2022, the CPA Institute complained to the ITA about the large number of unclear reportable positions that have been issued over the years, including some needed to correct previous reportable positions. How is a taxpayer meant to know what the tax law says if the ITA doesn’t always know and has to correct itself? In partial response, the ITA issued this year a compendium of all the reportable positions to date sorted by subject, but with a warning not to rely on the stated subject!

Next Steps:

Please contact us to discuss any of the above matters further, or any other matter.

As always, consult experienced legal and tax advisors in each country at an early stage in specific cases.

(c) Leon Harris 28.12.22

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