Legal Update: Tax - December 2016

As part of its continuing efforts to develop legislation regarding the taxation of non-Israeli persons providing digital services in Israel, the Israel Tax Authority recently published a proposed amendment to the Value Added Tax Law (the "Proposed Amendment"). The Proposed Amendment would impose VAT on non-Israeli companies that sell or supply electronic services and products, communications services and radio or television broadcasts in Israel (the "Digital Services").

The Proposed Amendment follows an Israel Tax Authority tax circular, published earlier this year that considered the taxation of foreign companies in Israel through the internet. The circular referenced OECD surveys that described the difficulties encountered by tax authorities in collecting VAT from individuals (in contrast to companies) in the context of the OECD's Base Erosion and Profit Shifting project.