New Taxes On Extraction of Resources in Israel

May 19, 2014 Taxation in Israel

JERUSALEM – Business extracting mineral resources in Israel could soon pay a new windfall tax, and a resource royalty, while facing greater scrutiny of their tax affairs.

On May 18th a government appointed committee, established to examine potential changes to the taxation of natural resources, issued an interim report recommending a thorough revamp of the taxation of extraction operations, a move which could raise as much as ILS 500 million per year of new tax revenues.

In the report the experts of the committee called for a new windfall tax of 42 percent to be paid by any business involved in the extraction of any natural resource in Israel, in addition to the standard corporate income tax.

The committee also called for the royalty on the extraction of any natural resources to be set at 5 percent, as an alternative to the current system where royalties vary from 2 percent to 10 percent.

In an effort to secure the stream of tax revenues from extraction operators, the committee also called for the tax authorities to pay closer scrutiny to the transfer pricing practices of these businesses to ensure that the internal price setting of resources is in line with standard practices.

Photo by: Jennifer Woodard Maderazo