Tax Treaty Case Law around the Globe 2017

1. S. 352Introduction

Israel is an open export-based economy that relies on international commerce. Accordingly, over the years it has signed many trade and investment agreements and is a signatory party to more than 50 bilateral tax treaties. Under Israeli law, the government enters treaties, and their ratification requires no parliamentary approval. As in many other common law countries, treaty law in Israel is not superior to domestic legislation. Hence, in the case of a conflict between domestic legislation and a treaty, the later (or more specific) source of law prevails. Nevertheless, with respect to double taxation treaties the situation is different - since section 196 of the Income Tax Act 1963 (hereinafter ITA) explicitly grants superiority to double tax treaties over domestic tax legislation.

The United States is the major Israeli trading partner. The two countries first signed a tax treaty in 1975. It was renegotiated and amended in 1995. Given the dominant position of the United States-Israel commercial (and political) ties - the Israel-United States Income Tax Treaty (1995) (hereinafter, the Israel-US tax treaty) is probably the most important double tax treaty from Israel’s ...