Israel Boosts Tax Treaty Network

by Lorys Charalambous, Tax-News.com, Cyprus

16 August 2011

The Israeli government has announced that double tax avoidance treaties have been signed and initialled with Malta and Panama respectively. The treaties will enter into effect on completion of ratification proceedings in the two countries.

The treaty signed with Malta includes a clause for the exchange of information between the tax authorities of both countries, based on the model treaty of the Organization for Economic Cooperation and Development (OECD). The tax withholding rates in the country where the payment is made (the country of origin) have been set at 5% on interest payments and 0%–15% on dividends. With regard to royalties and capital gains, taxation will be only in the seller’s country of domicile. A company carrying out a construction project in the other country will be charged tax in that country only if the project’s duration is over 12 months.

The treaty initialled with Panama also includes a clause for the exchange of information between the tax authorities of both countries, based on the OECD model treaty. The tax withholding rates in the country in the country of origin have been set at 15% on interest, dividend and royalty payments. A company carrying out a construction project in the other country will be charged tax in that country only if the project’s duration is over nine months.

Director of the State Revenue Department in the Israeli Ministry of Finance, Frida Israeli, said: “The treaties have been signed as part of the Ministry of Finance’s policy of expanding the network of treaties signed by Israel, which grant concessions regarding double taxation stemming from mutual investments on the one hand, and enable the exchange of information between the countries’ tax authorities on the other."

The treaties will enter into effect on completion of ratification proceedings in the two countries.

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