Israeli Offshore Underlying Company 

Amendment 197|Income Tax|Trust|Underlying Company

Dr. Avi Nov, Adv.

July 2014

A new amendment to the Israeli Income Tax ordinance (Amendment 197) integrated various changes to the trust regime, including modifications to the rules governing the Israeli Offshore Underlying Company. A trust is an agreement in which a trustee holds assets for a beneficiary. An Underlying Company is a company that holds the trust assets on behalf of the trustee.  

See also:

New Israeli Tax Regime for Trusts
Changes in Israeli Taxation of Trusts 

Israeli tax law provides an exceptional tax planning strategy for foreign investors who can use an Israeli Offshore Underlying Company as the owner of their global investments and have full exemption from Israeli tax. 
See also:
The Israeli underlying company
New Israeli Tax Rules for Underlying Companies 

Before Amendment 197

The Income Tax ordinance, before Amendment 197, provided that an Israeli Offshore Underlying Company is a company that holds the assets of a trust on behalf of the trustee directly or indirectly, regardless of its residency. The property the company belongs to the trustee and the company's income is considered as that of the trustee. In addition, the Israeli Offshore Underlying Company was not required to file an annual tax report. 

After Amendment 197

According to Amendment 197, an Israeli Offshore Underlying Company is a company that holds the trust assets in behalf of the trustee and meets all of the following requirements:

1. The Israeli Offshore Underlying Company was established to hold the trust assets only;

2. The Israeli Offshore Underlying Company (only in the case of an Israeli Resident Trust, Israeli Beneficiary Trust, Israeli Testamentary Trust and a trust that holds assets in Israel) needs to send notification to the Tax authorities within 90 days since the date of incorporation.

3. The trustee directly or indirectly through another company owns 100% of the Israeli Offshore Underlying Company's shares. 


Dr. Avi Nov Law Offices, Israeli & international tax law 
*This article is intended for informative purposes only and is in no way to be construed as tax advice or a legal opinion

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