A Foreign Occupation Company

Eli Doron, adv. - Yaron Tikotzky, adv. (c.p.a)conditions:
eli-doron@taxlawyers.co.il(1)Â The company has no more than 5
A company that was established outside of Israelmanagers and administrators (as defined in the
and managed from outside her, as well, is aIsraeli Tax Code); it is not a subsidiary and not a
foreign company for tax purposes, exempt fromcompany with public interest. However, foreign
all foreign derived income. However, as the Israelicompanies that accumulate only conditions (2)-(4)
legislature wished to prevent Israelis, who arewill also be considered foreign occupation
subject to tax on foreign derived income, fromcompanies.
using the foreign occupation company for tax(2)Â At least 75% of the foreign
avoidance, determined that such a company isoccupation company is directly or indirectly held
subject to income tax for the special occupation(as defined in article 88 of the Israeli Tax Code)
that in trades in.by Israeli residents or citizens (as defined in article
Â3A of the Israeli Tax Code).
A "special occupation" is, among other definitions,(3)Â Those holding 50% of the
defined as consultant (including the financial,management in the company are occupied by the
personal, military, agricultural, technical, engineering,company for the special occupation that the
management, political, scientific, taxation, businesscompany provides.
and economical fields) and management (including(4)Â The majority of income and revenue
managing files, investments and property,of the company in a given tax year are derived
company and organization management infrom the special occupation of the company.
receivership, dismantling procedures andThese conditions, although well established both in
bankruptcy).legislation and in court rulings, should nevertheless
Therefore, a foreign occupation company is abe interpreted according to the law's end, which is
company that consists of four accumulatingto fight tax avoidance.