Proposed classifications of foreign companies as Israeli tax residents and proposed presumption of “Passive Income” with respect to Controlled Foreign Corporations (CFC)

In the field of international taxation the proposed tax legislation includes two important far reaching provisions. One provision is connected to a new classification when a foreign company is considered having its tax residence in Israel. The other provision deals with a new classification of “Passive Income” with respect to the taxation of a controlling shareholder of a Controlled Foreign Corporation (CFC).  The good news is that a third proposed provision which called for the cancellation of the 10-year reporting exemption for foreign source income and assets for Olim or long-term returning residents has been removed from the legislative proposal for the year 2016/2017. Accordingly, New Immigrants will continue to enjoy the reporting exemption at least for the near future.

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