Oil & Gas in Israel Overview of Tax Aspects

Transcription

1 Oil & Gas in Israel Overview of Tax Aspects Ori Tieger, Israel

2 Discussion Israeli Tax System General Guidelines Oil and Gas Sector Foreign Entities Operating in Israel Key Tax Considerations Ernst & Young Israel Oil and Gas Practice Page 2

3 Israeli Tax System - General Guidelines Corporate Income Tax Resident companies are subject to Israeli tax on their worldwide income Nonresident companies are subject to Israeli tax on Israeli sourced income unless otherwise provided for in an applicable tax treaty Corporate Tax Rates The general corporate income tax rate ( CIT ) from 2012 is 25% The VAT rate is 17% Page 3

4 Israeli Tax System - General Guidelines cont. Israel imposes a 30% withholding tax on dividends paid to shareholders holding 10% or more of the company (material shareholders) whereas a 25% withholding tax is imposed on shareholders holding less than 10% of the company Taking into account the 25% Israeli corporate tax rate, the effective tax rates for shareholders of Israeli companies are as follows: Year Material shareholders % Other shareholders % Note that the dividend withholding tax rates mentioned above and reflected in the table may be reduced based on applicable tax treaties Israel has about 50 tax treaties Page 4

5 Israeli Tax System - General Guidelines cont. Key Tax Treaties Non treaty country (Cyprus) Dividend WHT Interest WHT Royalties WHT 25%/30%(*) 25% 25% US 12.5/15% 10/17.5% 10%/15% Netherlands 5%/10%/15% 10%/15% 5% Russian Fed 10% 10% 10% (*) Material shareholders > 10% Capital Gain Capital gains from the sale of shares in an Israeli company are exempt from tax (except where the company is a real estate company) Page 5

6 Israeli Tax System Oil and Gas Sector In addition to corporate income tax, companies in the Oil and Gas sector are subject to the following: Royalties at 12.5% of the wellhead price A levy in accordance to the Windfall Profits Tax Law 2011 Page 6

7 The Windfall Profits Tax Law 2011 main principles of the Law According to the Windfall Profits Tax Law, the rates of the levy are determined based on the R Factor The R Factor is computed as the ratio between the aggregate revenues from the project and the aggregate investments in the project The rate of the levy ranges between 20% (when the R Factor equals 1.5) and 45.52% (when the R Factor equals 2.3) The levy itself is a tax deductible expense R Factor Levy CIT Total % 25% 25% % 25% 40% 2 35% 25% 51.25% % 25% 59.14% Page 7

8 Foreign entities operating in Israel Key tax considerations All companies operating in Israel must register with the Registrar of Companies and the Israel Tax Authority Dividend withholding tax consideration (company vs. branch) Territorial Water vs. Continental Shelf ITA regards the Continental Shelf as part of Israel Payments to subcontractors withholding obligation rulings are available Page 8

9 Foreign entities operating in Israel Key tax considerations Employees Work permits required from day one Withholding obligation employee residency/ period/ permanent establishment Indirect Tax Special relief is available for drilling companies from Excise Tax. Import Tax exemption subject to conditions and relevant procedure Page 9

10 Ernst & Young Israel The largest accounting firm in Israel (D&B, May 2011) Approximately 1800 employees including 500 accountants Ernst & Young Israel Offices in Tel-Aviv, Haifa, Jerusalem and Be er-sheva Industry focused Client Service Groups Page 10

11 In Israel and in the US Since 1994, Ernst & Young Israel has been a member of Ernst & Young Global and has been regarded as part of the Americas As part of the Americas, Ernst & Young Israel has desks in NY and other cities in the US. These desks, which specialize in tax and accounting issues, provide services to Israeli companies operating in the US, with special focus on international tax, US and international accounting and US SEC relations Page 11

12 Oil and Gas Practice Ernst & Young s Oil and Gas practice is regarded as an industry leader in the Oil and Gas industry in Israel The practice is a primary audit and tax service provider for all five operators currently operating in Israel The practice has vast experience with regards to the unique business, tax and accounting aspects of the Oil and Gas sector and provides upgraded comprehensive services and solutions to groups operating in the industry Page 12

13 Thank you