Tax Treaty Case Law around the Globe 2021

S. 290I. Introduction

Israel is an open export-based economy that relies on international commerce. Accordingly, over the years, it signed many trade and investment agreements and is a signatory party to more than 50 bilateral tax treaties. Under Israeli law, the government enters into 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 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 legal condition is slightly different because section 196 of the Income tax Act 1963 (hereinafter ITA) explicitly grants superiority to double tax treaties over domestic tax legislation.

Despite the importance of international commerce and investments to the Israeli economy, there are few court cases that deal with international tax disputes and hardly any that involve double tax treaties. There are two different, yet somewhat complementary, explanations for this absence. First, the lack of treaty cases can be viewed as an intentional decision by the tax autho...