No Taxes to Be Paid On Tnuva Deal

Amid the hoopla over the sale of Tnuva Food Industries to China’s Bright Food, an Israeli tax expert has noted that the government will not receive anything in taxes from the deal, Globes reported.

“The finance minister could have set terms for exceptions to the law that gives foreign investors a tax exemption on the purchase of shares in Israel, and it is regrettable that he did not do so.” Professor Yitzhak Hadari, an expert on international taxes, said.

“Apax Partners [the British firm which owned the controlling interest in Tnuva] is a lost cause, but he still has the opportunity to correct this matter in the future, so that the Chinese will pay taxes when they sell Tnuva.”

Article 97 of the Income Tax Code states that a foreign resident who buys shares in Israel is exempt from taxes (subject to certain exceptions). Apax is eligible for this exemption on the sale of a company, but, says Hadari, “The finance minister has the authority to set all kinds of exceptions to the tax exemption, but he does not use this authority,” he says.

“There is no justification for this exemption. Apax made a fast buck, a handsome profit, which is fine — but it should pay taxes in Israel or in the treaty country, if it comes from a treaty country. But my guess is that it is listed in a tax haven somewhere in the world, so it pays no taxes anywhere on its huge profits,” Hadari said.

This article appeared in print on page 6 of the May 26th, 2014 edition of Hamodia.