Approval of a bill in the field of transfer pricing- effective from 2022

A transfer pricing bill has now been approved. The transfer pricing bill constitutes another step in strengthening the supervision and control procedures of the Tax Authority in the field of transfer pricing (along with changes led by other tax authorities around the world).

At present, proposed regulations have not yet been approved by virtue of this legislation but are expected to be approved soon.

The following presents the main points of the approval of the legislation, regarding the update to the documentation requirements:

Type of documentation required	Characterization of the documentation	Status
Master File	A document that includes comprehensive information about the multinational group as a whole. It will usually be reported by the (ultimate) parent company of the group (i.e., applies to an Israeli parent company holding foreign entities).	Will enter into force under the regulations that have not yet been approved yet. Relevant for tax return 2022 and onwards.   Following the discussion that took place in the Finance Committee, it seems that the threshold will probably be a group turnover of NIS 150 million.
Local File	Upgrading the required documentation obligations	The revised documentation requirement will enter into force under the regulations that have not yet been approved yet. Relevant for tax return 2022 and onwards.
CbCR	An inter-state report, including comprehensive and detailed information on all entities within the multinational group, that will be submitted in Israel by the ultimate parent entity resident of Israel. Apply to a multinational group whose turnover in the year prior to the reporting year exceeded NIS 3.4 billion.	Entry into force: Apply to tax return 2022 (can also be submitted voluntarily for tax return 2021- until 31/3/2023)

 

The update to the documentation requirement is a continuation of the upgrade to the transfer pricing form (1385) attached to the tax return, and to Income Tax Circular 1/2020 published in June 2020, which specified the conditions required to comply with the provisions of Section 85A of the Income Tax Ordinance and related regulations (see also our publications on the subject).

BDO IL's transfer pricing and international taxation teams are at your service for ongoing consultation to examine the international taxation policy and the group's compliance with the documentation obligations in Israel and around the world.

For further details and assistance, please contact:

C.P.A. (Advocate) Amit Shalit, Partner and Head of Transfer Pricing
By email: AmitS@bdo.co.il  or by telephone: 052-6008056