Multinational tech giants get slapped with Israeli tax bills

Taxation is expected to generate ‘hundreds of millions of shekels a year’ for the state

By Shoshanna Solomon

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6 January 2019, 4:01 pm Edit

Shoshanna Solomon was The Times of Israel's Startups and Business reporter

Israel’s tax authority has presented tech multinationals operating in the country with bills assessing how much they need to pay in taxes, a spokeswoman for the authority confirmed on Sunday.

TheMarker financial website in Hebrew first reported the news.

The tax assessments presented to the multinationals are in line with the authority’s policy to act vis-a-vis these firms, the spokeswoman said. “Tax assessments have been issued during this year to a number of multinational firms and others will be issued shortly,” she said.

Companies will be able to appeal the assessments, she added, declining to say how much money the authority is expecting to get from the taxation, or to name the firms the assessments have been sent to.

Google, Facebook and Apple all have operations in Israel. Google’s income from operations in Israel is estimated to be some NIS 560 million a year ($151 million), TheMarker said.

This photo from January 3, 2013, shows Google’s headquarters in Mountain View, California. (AP Photo/Marcio Jose Sanchez, File)

Taxing the multinationals operating in Israel “will generate hundreds of millions of shekels a year,” the former head of the Israeli Tax Authority, Moshe Asher, said in an interview with The Times of Israel in February.

Only companies from countries Israel has tax treaties with and that have a physical presence in Israel — whether in the form of an office, a management team or a local branch — will be taxed, Asher said. And even then, the corporate tax rate would be applied only on the profits that are generated from their local activities, he said.

Taxation of internet multinationals is an issue that is creating a headache for many nations, as a growing digital global economy that raises the question of where these companies should pay taxes on the businesses they generate locally. Policies are developing globally, and Israel is considered a pioneer in setting out a path forward.

France has also led a major push to increase taxes in the European Union on mega tech firms such as Google and Facebook, which are seen as earning huge profits at the expense of state coffers.

The Israeli Tax Authority set out its guidelines for multinational internet companies in April 2016, with their implementation beginning now.